Rising Crude Oil Prices Could Impact Coal Miners


Nov. 8 2017, Updated 4:25 p.m. ET

Crude oil prices

On November 3, 2017, the WTI (West Texas Intermediate) crude oil price settled at $55.64 per barrel when the market closed. The price rose 3.2% from $53.90 per barrel posted on October 27, 2017.

As of November 3, 2017, Brent crude oil prices rose 2.1% on a week-over-week basis. Brent crude oil settled at $62.07 per barrel on November 3, 2017. According to the U.S. Energy Information Administration, crude oil inventories are near a two-year low, while the prices are near a three-year high. Higher crude oil prices could benefit oil producers like Stone Energy (SGY) and Apache (APA).

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Do crude oil prices impact coal producers?

It’s important to note that coal and crude oil aren’t linked directly. Crude oil prices are a mixed driver for the coal industry. Price shifts in crude oil impact coal companies (KOL) like Alpha Natural Resources (ANRZQ) and Westmoreland Coal Company (WLB) in many ways.

Crude oil is a key component in natural gas production. The natural gas inventory and prices drive coal prices. As a result, crude oil prices have an indirect impact on the coal industry.

Crude oil is a vital element in the coal mining process. When oil prices fall, crude oil producers reduce their production to avoid losses. It frees up more railcars for coal transportation. Railroad transportation helps coal producers reduce their operating costs.

Despite playing a prominent role in US natural gas production and the coal mining process, crude oil isn’t involved in electricity generation. Crude oil price fluctuations don’t have a significant impact on utilities.

In the next part, we’ll discuss the latest coal inventory data.


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