Monday, July 1, 2013

America's Cheapest Natural Gas Is Marcellus: Price Falls To $2.89 & Is Bad News For Coal

Marcellus gas closed on Friday at $2.89 or about 23% cheaper than the $3.56 price Henry Hub gas.  Whenever gas anywhere falls below $3 for a thousand cubic feet, that is a major energy market event and a coal killer.

Marcellus gas is substantially cheaper not only compared to gas at Henry Hub but also to gas traded at Panhandle East, the second lowest spot price on Friday, and Haynesville gas in Louisiana.  Panhandle East gas closed at $3.36 or about 17% higher than Marcellus gas.

Across the board, spot natural gas prices have fallen approximately 50 cents per thousand cubic feet after going above $4.  Prices below $3.50 make natural gas much more competitive with coal, while gas priced below $3 displaces large amounts of coal generation.

Gas prices above $3.50 rebounded coal from a low of 32% market share in April 2012 to now about 40%, while sinking gas from a high market share of 32% in April 2012 to about 26% currently. If gas prices settle below $3.50 for the next 6 months, gas will regain some market share lost to coal between November 2012 and April 2013.

Gas and coal duel daily for generation market share, and low natural gas prices remain the real war on coal.

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