Power Companies Dump Natural Gas as Prices Close above $3 (UNG)
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Natural gas futures are on track for a weekly close above $3 per million BTU. $3 has been a significant level for natural gas, since it is the point at which some say natural gas/ coal switching by power companies loses steam.
The move higher this week in natural gas was driven by weekly inventory data that showed supply of natural gas grew less than the 5 year trend of 75 bcf. While storage remains high, lower supply builds show tightening.
Natural gas is also benefiting from demand from longer term investors, who are calling for a bottom in the commodity. With prices coming off 10-year lows, some say now is the time for a long term investment in the commodity.
But it isn't all good news for natural gas. The spread between NYMEX Central Appalachian coal prices and Henry Hub natural gas futures narrowed on Friday. According to reports out or Reuters, power plants are already moving back to coal in limited numbers, a trend that is set to increase with gas prices expected to continue rising.
The nat-gas/coal spread peaked at $2.196 on April 19 when gas, which has historically been more expensive than coal, hit a 10-year low of $1.902. while coal was fetching $4.10. Since then, gas prices have rebounded to $3.04. Coal, which is typically priced per ton, dipped to about $4.03 per million btu.
United States Natural Gas Fund, LP (NYSE: UNG) was higher by 1.17 percent on Friday. United States Natural Gas Fund, LP (NYSE: UNG) has gained over 18 percent in 30 days.
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The move higher this week in natural gas was driven by weekly inventory data that showed supply of natural gas grew less than the 5 year trend of 75 bcf. While storage remains high, lower supply builds show tightening.
Natural gas is also benefiting from demand from longer term investors, who are calling for a bottom in the commodity. With prices coming off 10-year lows, some say now is the time for a long term investment in the commodity.
But it isn't all good news for natural gas. The spread between NYMEX Central Appalachian coal prices and Henry Hub natural gas futures narrowed on Friday. According to reports out or Reuters, power plants are already moving back to coal in limited numbers, a trend that is set to increase with gas prices expected to continue rising.
The nat-gas/coal spread peaked at $2.196 on April 19 when gas, which has historically been more expensive than coal, hit a 10-year low of $1.902. while coal was fetching $4.10. Since then, gas prices have rebounded to $3.04. Coal, which is typically priced per ton, dipped to about $4.03 per million btu.
United States Natural Gas Fund, LP (NYSE: UNG) was higher by 1.17 percent on Friday. United States Natural Gas Fund, LP (NYSE: UNG) has gained over 18 percent in 30 days.
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