Some investors are wagering on natural-gas prices losing their spark.
Natural-gas prices have jumped as much as 44% since sinking to decade lows last month. Much of that rally had been powered by rising demand from utilities, which had taken advantage of the low prices by using more natural gas instead of coal. But the higher prices are making coal competitive once again. Coal prices are down 22% since the start of the year.
Some utilities are beholden to coal in other ways besides price, said Rocco Canonica, director of energy analysis at Bentek Energy, a research firm. For one, they are bound by supply contracts that force them to buy coal. Coal stockpiles held by power generators in the U.S. are expected to reach a record level in May, according to the Energy Information Administration.
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