Natural gas production
Natural gas production is a key metric for investors. It helps determine the outlook for thermal coal in the short term. Natural gas is used by the residential, commercial, industrial, transportation, and electric power segments. Residential and commercial users mainly use it for heating.
Natural gas is produced throughout the year, but demand is highest during the winter. As a result, excess natural gas that’s produced during the spring, summer, and fall is stored underground. The excess natural gas is used during the winter.
U.S. Energy Information Administration publishes natural gas production data on a monthly basis. The most recent data were published on March 31.
In the US, natural gas production is rising due to the shale gas boom. Though natural gas rig counts have fallen steadily, production is rising. In January 2015, the US produced 2.3 trillion cubic feet of natural gas compared to 2.1 trillion cubic feet in January 2014.
Impact on coal
Higher natural gas production puts pressure on natural gas prices. Lower natural gas prices, in turn, put pressure on demand for thermal coal and its prices. Rising natural gas production in a stable demand environment is negative for coal.
Eastern coal producers (KOL) including Alliance Resource Partners (ARLP), Alpha Natural Resources (ANR), and Peabody Energy (BTU) are affected most. Meanwhile, ultra-low natural gas prices have also put pressure on otherwise safer Powder River Basin producers such as Cloud Peak Energy (CLD).