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What Impacted the US Coal Market in the Week Ended October 6?

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What Impacted the US Coal Market in the Week Ended October 6? PART 1 OF 5

How Natural Gas Inventory Affected Coal on September 29

Key coal indicators

Various factors drive short-term market movements. It’s a good idea for investors to monitor these factors to understand the market trends. Primary coal (KOL) indicators are natural gas prices and weather changes. The unpredictability of weather makes it a significant indicator of short-term price shifts.

The inventory level of commodities is a crucial benchmark to understand the supply and demand trends. It helps to monitor commodity price variations, which are a function of supply and demand.

How Natural Gas Inventory Affected Coal on September 29

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Natural gas inventory

According to the natural gas inventory report published by the EIA for the week ended September 29, natural gas inventory came in at 3,508 Bcf (billion cubic feet), which was higher than 3,466 Bcf reported last week.

This inventory figure fell 4.4% from the 3,669 Bcf reported during the equivalent week in 2016. It also fell 0.2% from the five-year average of 3,516 Bcf.

Impact

Since April 2017, the natural gas inventory has been lower than it was in 2016, but it was higher than the five-year average. This trend in inventory levels suggests that a rebalance toward average inventory levels in the previous years may happen. 

As we can see from the above figures, the inventory level has dropped marginally below the five-year average. A decrease in inventory levels below the five-year average could positively affect natural gas prices.

However, the coal (KOL) industry is positively impacted by rising natural gas prices. Utilities (XLU) would prefer natural gas less if the prices were high, leading them to opt for coal.

Some of the coal producers that are likely to be impacted by changes in natural gas prices include Peabody Energy (BTU), Arch Coal (ARCH), Westmoreland Coal Company (WLB), Cloud Peak Energy (CLD), and Natural Resources Partners (NRP).

Next, let’s look at the factors that are impacting natural gas prices.

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