HOUSTON—Natural-gas prices jumped 5.7%, settling at their highest level in five months. Forecasts of warmer-than-normal temperatures are expected to heat up demand for the fuel.
Natural gas for June delivery settled at $2.742 a million British thermal units, up 14.8 cents to reach the highest close since Jan. 11.
Forecasts of above-average temperatures throughout the U.S. should spur demand for natural gas from power utilities as more consumers switch on their air conditioning, traders and analysts said. They add that as prices remain below $3, natural gas will continue to be used as a cheaper alternative to coal at a growing number of power plants.
As a reference point EQU was trading at $4.7 on January 11th, granted oil was a bit higher at $99 and NGLs generally higher but EQU was trading 32% higher with no strategic review in sight and no signed Mississippian deal. EQU continues to offer tremendous value at current levels, especially considering that a sizable divestiture or a full liquidation is around 8 weeks away.
You say that the electric compines will swicth back to coal at $3 gas but gas is a cleaner burning fuel, what about epa standers being met, could this not bump up gas to say $3.5 to stay under compliace just a thought
I fully agree, enhanced environmental regulation will continue to make coal less attractive. I doubt that many of the utilities that switched to NG will switch back to coal unless prices move significantly above $3. Furthermore, NG marginal cost of production is above $3.5, it is unlikely that prices can be sustained under $3.5 for a long time.
By the way Encana one of the largest NG producers in North America believes that NG marginal cost is between $4 to $6 (which I believe that to be on full cycle basis):