U.S. utilities to burn more coal as natgas prices climb -traders
Ouch jimmy boy.
(Reuters) - U.S. utilities will use more coal and less natural gas to generate power as coal becomes cheaper and gas more expensive, electricity traders said on Friday.
The relative price difference between NYMEX Central Appalachian coal and NYMEX Henry Hub gas is at its widest since June 2011 at almost $1.50 per million British thermal units (mmBtu), according to Reuters data.
Natural gas traded at $3.87 per mmBtu on Friday morning, while Eastern coal was selling at $2.40 per mmBtu.
Prices of Central Appalachian coal have slipped to their lowest levels since late January.
Meanwhile, natural gas prices climbed to their highest levels since November due to four straight weeks of larger-than-expected drawdowns from inventories.
Energy traders, however, said some coal plants remained more expensive than gas units by about 15 cents per mmBtu. Gas plants are about 25 percent more efficient than coal plants, they said, and it costs about $1 per mmBtu to transport coal from the mine to some plants by rail, but just a few cents to transport gas by pipeline.
In 2012, the price of gas, which has historically been more expensive than coal, dropped to a more than 10-year low due primarily to record production from shale.
Those weak gas prices depressed power prices to at least decade lows in most regions and led generators to switch from coal to gas plants in record numbers.
Author: Vicky Validakis
Posted: Thursday , 14 Mar 2013
SYDNEY (Australian Mining) -
Xstrata is pushing ahead with its expansion of Rolleston coal mine in Queensland, signing a deal with Aurizon that will see haulage increase to 20 million tonnes per year. The expansion is set to double the amount of coal mined, with current production levels sitting at around 9.4 million tonnes.
Under the contract announced today, tonnages will hauled to RG Tanna Terminal in Gladstone and the new Wiggins Island Coal Terminal which is under construction in Gladstone. Aurizon chief Lance Hockridge said he was pleased his company won the bid.
“Xstrata ran a competitive bidding process for this large-scale contract for Rolleston, so Aurizon is extremely pleased with this vote of confidence in our continued high performance on this haul. Aurizon provides Xstrata with 80% of its haulage services in Queensland.
Aurizon said it will invest up to $215 million in rolling stock to support the haul, and wants the 110km Bauhinia rail spur that services Rolleston to be electrified. All services for Rolleston are currently provided by diesel-hauled trains.
Article published courtesy of Australian Mining. For more daily news and comment on Australia's mining sector click here
Here is a little rule of thumb on the prices of natural gas. As Ng storage approaches historical levels natural gas will approach $4. Historical levels for the end of thr heating season are not 1714, as is being reported. That figure is skewed by the mild 2012-113 winter. Historical levels are about 1625.
We should end the heating season at about 1750. NG prices will be around $4. As less Ng is being produced we will probably reach historical storage levels of natural gas sometime in may or june. Ng should be $4.50 at that time.
After that, NG prices go up if ng storage levels are below historical levels but to what price is anybodies guess. Don't expend NG producers to rush in to increase production at $4.50. Most wells are still losing money at $4.50. In addition, immense numbers of shale ng plays have to be drilled just to keep production stable. Even more wells have to be drilled to increase ng production.
At then end of the day, ng prices will correlate with the cost of production of ng as well as global prices for ng. That price will be above $4.50 but who knows for sure what it is.