Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Patriot Coal (NYS: PCX) jumped 10% today on word that natural gas giant Chesapeake Energy was cutting natural gas production.
So what: Chesapeake will cut 500 million cubic feet of natural gas production, with more cuts possible, in response to low natural gas prices. This represents 8% of the company's production, and has sent thermal coal producers higher today.
Now what: The theory is, if natural gas prices go up the utilities won't curtail coal usage as much as feared, increasing demand. That may be true to a small extent, but production of natural gas is still outpacing demand in the current environment and this would need to be a long-term rally to make a big difference for coal producers. I'm not buying this bump today and think it is a nice opportunity to cash out if you've been thinking about dumping coal shares.
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At the time this article was published Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Motley Fool newsletter services have recommended buying shares of Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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