Could Higher Crude Oil Prices Impact Coal Miners?
Crude oil prices
On September 8, 2017, Brent crude oil prices closed at $53.78 per barrel compared to the closing price of $52.69 per barrel in the previous week.
Interested in KOL? Don't miss the next report.
Receive e-mail alerts for new research on KOL
WTI (West Texas Intermediate) crude oil prices closed at $47.48 per barrel on September 8, 2017, compared to the previous week’s closing price of $47.32 per barrel on September 1, 2017.
Do crude oil prices affect coal producers?
Coal and crude oil are not direct competitors. However, for the US coal industry, oil prices are a mixed driver. Energy stocks, including coal stocks, follow crude oil prices. Major coal producers (KOL) Arch Coal (ARCH), Cloud Peak Energy (CLD), Peabody Energy (BTU), and Alliance Resource Partners (ARLP) are affected by crude oil prices in various ways. So it’s important for coal investors to track crude oil prices.
Oil pricing drives natural gas production trends, which in turn impact coal. Oil is an integral part of the mining process of coal. The rise in the price of oil leads to higher operating costs for coal producers.
A decline in crude oil prices results in a fall in fuel costs for coal producers. A fall in oil prices encourages US crude oil producers to reduce production, freeing rail infrastructure for coal transportation.
The impact of oil prices is insignificant for most utilities because oil is not a major fuel used to power electricity generation throughout the United States.
In the next part of this series, we’ll look at the latest data on coal production.