Crude oil prices
Crude oil prices rose after falling for two consecutive weeks during the week ended October 30, 2015. WTI (West Texas Intermediate) crude oil prices closed at $46.59 per MMBtu (British thermal units in millions) on October 30 compared to the October 23 close of $43.65 per barrel. This implies an increase of $2.94 per MMBtu during the week. Brent crude prices rose $1.58 per barrel during the week to $47.62 per barrel on October 30.
Why are crude oil prices important for coal producers?
Although coal and crude oil don’t directly compete with each other as fuels, it’s important for coal investors to track crude oil prices. Coal producers (KOL) such as Alliance Resource Partners (ARLP), Arch Coal (ACI), Peabody Energy (BTU), and Cloud Peak Energy (CLD) are affected in various ways by crude oil prices.
Oil prices are a mixed driver for the coal industry (KOL) in the United States. On the one hand, energy stocks, including coal stocks, generally follow crude oil prices. A fall in crude oil prices during 2H14 led to a sell-off of energy stocks, including solar and coal stocks.
On the other hand, a rise in crude oil prices results in a rise in fuel costs for coal producers. A rise in oil prices may encourage US crude oil producers to increase production, putting pressure on rail infrastructure available to transport coal.
For most utilities (XLU), the impact of oil prices isn’t significant. Oil isn’t a major fuel that powers electricity generation throughout the United States. Crude oil-fired capacities account for 11% of NRG Energy’s (NRG) total generation capacity.