Mild winter could further limit US coal output

OREANDA-NEWS. July 27, 2015.  Potentially mild weather during the coming fall and winter may do little to spur US coal production, which last week was estimated at 11.5pc lower than a year earlier.

A strong El Nino event of near-record intensity may occur in the fall and winter, MDA Weather Services said recently. That weather phenomenon could result in "unusually low heating demand" in the midcontinent and eastern US this winter, MDA manager of energy weather services Bob Haas said.

Coal demand is already down this year, in large part because of fuel switching as a result of lower natural gas prices and coal plant retirements. But recent weather caused output from US electric utilities to rise last week to 88 TWh, up by 3pc from the prior week and 6.5pc from a year earlier, the Edison Electric Institute said.

Gas demand will need to stay "very strong" to keep supply in check, FirstEnergy Capital analyst Martin King said. Prices will need to retreat to \\$2.60/mmBtu to spur demand from power generators, he said.

Lower coal demand by power generators is already cutting into production.

Coal production in all major US coal-producing regions fell during the week ended on 18 July from the prior year. Nationwide output in that week was 17.2mn short tons (15.6mn metric tonnes), down from 19.4mn st during the same week last year, according to US Energy Information Administration estimates.

Powder River basin output from Montana and Wyoming was 7.7mn st in the latest week, down by 10pc from 8.6mn st a year earlier. Western bituminous production fell by 14.4pc to 721,000st.

Appalachian output was 4.5mn st, down by 12.8pc. Lower production from West Virginia and eastern Kentucky contributed the most to that reduction.

Illinois basin production dropped to 2.4mn st, off by 8.4pc from a year earlier.