US OTC coal market in the east is encountering a great downfall, especially now that an absence of demand and weaker natural gas futures are being projected due to the market’s price drops for four consecutive sessions.
It seems that corporate stocks are not the only ones affected by the Malaysian Airlines jet incident. According to the reports, the dilemma may have brought weakness to the demand for gas in the market. Eventually, this resulted to a sell-off in the market. As indicated by data, the contract for NYMEX August gas futures had $3.954/MMBTu, which is basically the lowest since 29th of November, 2013. Nonetheless, this was rebutted by a broker who stated that there is a formation of price floor for the CAPP CSX contract’s front-month at an estimated $55/st. Another broker agreed that survival from price drop may occur, especially now that there are no buoyant factors to inhibit the cost from recovering.
US OTC coal market fall may call for physical market disconnection from financial market. Although this does not happen most of the time, the physical market for US coals may no longer be a representation of the general market. Besides the geopolitical issue, the drop in prices may also be due to seasonal temperatures, coal rail transportation problems, as well as illiquidity among others.
Last Thursday, deals that have been assessed by Platts, which include Q4 2014 CSX Central Appalachian contract having a trade of $58/st for 5,000 st/month and physical CAPP CSX contract at $57.75/st, were considered at their lowest. Other than that, US OTC coal market had three physical deals for August Powder River Basin at 8,800 Btu/lb, but the prices are considered unprofitable for the producers, especially now that the “mid $11/st” level is approaching for the front-month contact.