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U.S. coal stockpiles above average 11 straight months

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A few cold days this winter haven't been enough to drive up demand for coal.

Electric utilities typically try to keep at least a 60-day supply of coal on hand. Because coal is purchased through long-term contracts, when less coal is burned stockpiles accumulate beyond targeted amounts.

According to the Energy Information Administration, coal stockpiles have now been above average in the U.S. for an 11 straight months as of this past November.

"Increased competition between fuels as well as a warm winter 2011-12 led to lower consumption of coal and, thus, higher coal stockpiles at electric power plants in the United States through November 2012," the EIA wrote in its Today in Energy blog.

When summers are cooler than average, less coal is also burned and can result in a similar sales challenge.

"Historically low natural gas prices contributed to reduced coal consumption at electric power plants during the spring and summer of 2012, while a warmer-than-normal winter 2011-12 decreased the overall heating load in the winter," the EIA states.

When coal stockpiles mount, utilities are likely to purchase less coal on future contracts. Coal companies could respond by lowering production.

"Because long-term contracts often have penalties associated with deferring shipments of coal, power plants are faced with few options other than continuing to accept deliveries," EIA states. "As the long-term contracts for coal purchases expire, electric utilities may choose to lower future purchases, given the high inventory levels."

For more information or to see graphics produced by the EIA, visit: http://www.eia.gov/todayinenergy/detail.cfm?id=9711&src=email