US Utilities to Burn More Natural Gas as Prices Decline

From Mining Weekly

The recent decline in US natural gas prices is set to dent demand for coal as utilities use more gas to generate electricity, according to electricity traders.

Natural gas prices have declined over the past week due to record-high storage levels and mild winter weather forecasts.

That decline in gas narrowed the relative price difference between NYMEX Central Appalachian coal and NYMEX Henry Hub natural gas to below $1 per million British thermal units (mmBtu) for the first time since September, according to Reuters data.

Natural gas traded at $3.18/mmBtu Thursday morning, while Eastern coal was selling for about $2.20/mmBtu.

Energy traders said it costs about $1/mmBtu to transport Eastern coal. So when natural gas prices are less than $1 over coal, traders said it starts to make economic sense for generators to burn gas rather than coal.

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