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Nov
25
Tim Lambert
The Bullish Future for Natural Gas is Bearish for Coal
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As detailed in another post on this site, there is a bullish future for natural gas, especially in North America.  But increasingly that is coming at the expense of coal.   The exchange traded funds for each of the industries tell the story: for the last week, United States Natural Gas (NYSE: UNG) is up more than 3%.  By contrast, Market Vectors Coal (NYSE: KOL) has fallen more than 2%.

For 2013, Market Vectors Coal has plunged by more than 20%.

There was more bearish news for coal with the report from the US Energy Information Energy Agency that natural gas now supplies most of the electricity in the Southeast United States.  Coal used to provide about 60% of power.  Now it is around 40%.

Although hardly friendly to the fossil fuel energy, The Obama Administration has been especially hard on coal.  The White House is waging what many have termed the “War on Coal.”   In 2008, before the election of Obama, Market Vectors Coal was over $60 a share.  Now it is around $20.

Just under $19 a share, United States Natural Gas has risen from a low of around $14 in 2012.  There are far greater supplies of natural gas now due to fracking.  In addition, export licenses are being approved.  Demand from abroad could take the price of natural gas higher, according to an article in The Wall Street Journal.

Demand from abroad is also needed to rescue coal.  Asia is the biggest user, with China consuming far more than others. Any bets on coal over the next three years will be wagers on economic growth in Asia supplying the greater demand.

 

 



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