Natural gas prices
The January 2018 US natural gas futures contract price settled at $2.98 per MMBtu (million British thermal unit). The Henry Hub natural gas spot price was $2.90 per MMBtu when the market closed on December 4, 2017, compared to $2.82 per MMBtu on November 27, 2017.
The EIA (U.S. Energy Information Administration), in its recent Short-Term Energy Outlook report, has projected the average Henry Hub natural gas spot price for 2018 at $3.10 per MMBtu. The forecast is 3% higher than the 2017 estimate of $3.01 per MMBtu. In the report, the EIA stated that predicted improvement in natural gas consumption and exports in 2018 led the agency to project a higher average Henry Hub price.
Natural gas prices seem to be picking up after a slump in the previous two weeks. Natural gas producers Chesapeake Energy (CHK) and Southwestern Energy (SWN) could benefit from a rise in natural gas prices since it could help them expand their margins.
Effect on coal producers
Utilities favor coal over natural gas when the price of natural gas rises. Coal (KOL) producers Cloud Peak Energy (CLD) and Arch Coal (ARCH) could gain more market share when that happens. They could also lose market share when natural gas prices are comparatively weak.
In the next part of this series, we’ll look at some details on coal inventory.