When oil prices exceed $150: Coal may be at a strategic reassessment window amid global “dual-track energy divergence”
The global energy market is undergoing an unprecedented “dual-track split”: Brent/WTI crude oil futures, affected by strategic reserve releases and speculative position adjustments, are hovering around the $100/barrel mark, while Dubai/Oman crude oil prices, which directly reflect Middle Eastern spot supply and demand, have soared above $155/barrel, with the spread widening to a historically extreme level of $55. The essence of this split is the decoupling between “financial pricing” and “physical supply and demand.”
Coal, as the “ballast stone” of China’s energy security and the most cost-effective alternative energy, is being systematically re-evaluated for its strategic value and commodity attributes.
1. What happened? Split oil prices
The global energy market is undergoing an unprecedented “dual-track split”: Brent/WTI crude oil futures, affected by strategic reserve releases and speculative position adjustments, are hovering around the $100/barrel mark, while Dubai/Oman crude oil prices, which directly reflect Middle Eastern spot supply and demand, have soared above $155/barrel, with the price spread widening to a historic extreme of $55. The essence of this split is the decoupling between “financial pricing” and “physical supply and demand.”
Against this backdrop, coal, as China’s “ballast stone” of energy security and the most cost-effective alternative energy, is being systematically re-assessed for its strategic value and commodity attributes.
① Fundamental reversal: In January–February 2026, domestic coal supply (production + imports) fell by 0.1% year-on-year, while downstream demand (thermal power + chemical industry + building materials) increased by 3.1% year-on-year, revealing a supply-demand gap and prompting a comprehensive de-stocking across the entire industry chain (ports, power plants, coking plants).
② Strengthened substitution effect: The extreme premium on Middle Eastern crude oil spot is forcing coastal power plants and chemical enterprises to increase their import coal purchases and rely more on domestic long-term contracts. The worsening situation of “inverted imports” (high overseas prices vs weak domestic prices) may be reversed in the next 1–2 months due to demand growth.
③ Cognitive logic reshaping: The market’s perception of coal is shifting from “cyclical commodity” to “defensive core asset with high cash flow, high barriers, and high dividends.”
While WTI crude futures traders at the New York Commodity Exchange focus on the $93/barrel price, spot buyers in the Persian Gulf face a completely different market: Dubai spot crude prices have soared to $157.66/barrel, with a monthly gain of up to $121.31%. This huge $55 spread is the result of regional inventory glut, U.S. strategic reserve releases, and technical selling in the futures market, but it does not reflect the real tightness of global physical supply.
The blockage of the Strait of Hormuz is a core variable. As the passage for about one-third of the world’s seaborne crude oil, shipping is currently almost at a standstill. Fujairah Port in the UAE—the only crude export route outside the Hormuz Strait—has repeatedly suspended loading operations. This means that even if countries like Saudi Arabia have spare capacity, they cannot deliver crude to Asian buyers at affordable costs. For countries like Japan, South Korea, and Europe, with dependence on Middle Eastern crude as high as 60–70%, “getting oil” is far more urgent than “getting cheap oil.” Historical experience shows that whenever the crude oil pricing system experiences systemic disruption and spreads widen above the substitution threshold, coal triggers its substitution logic. Currently, the heat value price ratio between crude oil and coal is severely out of the normal range.
For coastal power plants and coal chemical enterprises, the decision logic is clear:
① Direct combustion substitution: In some dual-fuel units, when oil prices exceed $100/barrel, oil-fired power generation is no longer economic, and companies tend to increase coal consumption to ensure power supply.
② Cost push: High crude oil prices directly drive up diesel and fuel oil prices, thereby increasing coal mining (mining machinery oil use) and transportation (trucks, railways, shipping) costs, providing cost-side support for coal prices.
③ Import substitution: The international coal market is also facing resource misallocation. Indonesian and Australian coal suppliers, seeing Middle Eastern crude at sky-high prices, strongly intend to hold goods and maintain prices. Although the current high import coal costs have led to sparse transactions domestically, this “volume-less price drop” situation is unsustainable. Once domestic port inventories reach a critical point, import coal prices will quickly catch up with the energy premium implied by Dubai crude.
2. Why is it important? Supply contraction and demand resilience as the gap forms
Data released by the National Bureau of Statistics paints a clear picture of improved supply-demand relations.
① Supply side: production contraction, limited import increments
Domestic production: In January–February 2026, industrial raw coal output above scale totaled 760 million tons, down 0.3% year-on-year. Although the decline narrowed compared to December 2025, average daily output was 12.93 million tons, down 41,000 tons/day year-on-year. This confirms that, under stricter safety production constraints and the normalization of “overproduction checks,” domestic supply elasticity is far less than before.
Coal imports: In January–February, coal imports were 77.22 million tons, up only 1.5% year-on-year, with the growth rate down 10.4 percentage points from December 2025. Especially in February, due to the Spring Festival and significantly narrower import price differentials, imports declined year-on-year. Combined with soaring shipping costs from current international geopolitical tensions, it’s expected that total coal imports in 2026 will struggle to maintain the high growth seen in 2025, or may even drop year-on-year.
Comprehensive calculations show that domestic coal supply (production + imports) in January–February had a year-on-year growth rate of -0.1%, turning from increase to decrease.
② Demand side: rebound in thermal power, strong non-power demand
Contrary to widespread market pessimism, demand data for January–February shows strong resilience.
Thermal power: January–February industrial thermal power output above scale is up 3.3% year-on-year, a strong 6.5 percentage point reversal compared to the 3.2% decline in December 2025. As wind, solar, and nuclear power growth slows, thermal power again serves as the cornerstone of energy security.
Non-power demand:
1) Chemicals: Weekly methanol output grew 6.5% year-on-year, highlighting the economic advantages of coal chemicals amid high oil prices.
2) Building materials: Cement output grew 6.8% year-on-year, with infrastructure investment (+9.76%) starting to show its pulling effect.
3) Coke: Output grew 1.1% year-on-year.
Based on the coal industry association’s downstream consumption shares (power 61%, chemicals 9%, building materials 5%, steel 16%), the four major sectors collectively drove coal consumption up 3.1% year-on-year in January–February, speeding up by 2.7 percentage points from December 2025.
③ Inventory: comprehensive de-stocking, price elasticity ready to take off
The direct result of the supply-demand gap is a comprehensive drop in inventory.
1) Thermal coal: At the end of February, northern ports’ inventory fell by 3.921 million tons from the start of the year to 24.406 million tons, a year-on-year drop of 4.849 million tons.
2) Coking coal: Inventories across production, ports, coking, and steel plants have all reduced.
Currently, power plants in eight coastal provinces in China still have relatively high days of available inventory, which is the main factor suppressing short-term spot price increases. But it is important to note that high inventories result from voluntary de-stocking, not a sign of weak demand. Once power plants judge that coal prices have limited room to decline or that import coal supplies are disrupted, a concentrated wave of restocking could quickly ignite the fuse for price hikes.
3. What to watch next? Three-tier drivers for the re-evaluation of coal
① The long-term nature of supply-side constraints
After years of supply-side structural reform, the coal industry’s capacity ceiling is clear. Unlike past cycles of “disorder after liberalization and stagnation after tightening,” current hard constraints from “dual-carbon” targets and safety production mean capacity expansion is no longer unchecked, even with high profits as incentive. This implies that the pricing center will systematically rise, and volatility will decrease.
② Re-evaluation of the energy security premium
Turbulence in the Middle East is a Damocles sword hanging over major economies. As the world’s largest energy importer, China must ensure that energy supply is “in its own hands.” Coal, as the energy variety with the highest domestic guarantee, is being elevated to unprecedented strategic value. This strategic value will ultimately be reflected in pricing mechanisms, translating into companies’ long-term profitability and valuation premiums.
③ High dividend, value reshaping for central state-owned enterprises (SOEs)
In the era of low interest rates, coal companies’ characteristics of “high profits, high cash flow, high dividends” make them rare defensive assets. Meanwhile, since 2025, central SOEs such as the State Energy Group and China Coal Group have started increasing their holdings and injecting assets into listed subsidiaries. This is not only a display of confidence, but also a real move to improve listed companies' quality and increase shareholder returns amid a new round of SOE reform. Asset injections will directly increase listed companies' resource reserves and output scale, bringing them external growth.
Conclusion: The global energy market is standing at a crucial crossroads. The fire at the Strait of Hormuz has blown open a $55 chasm between WTI futures and Dubai spot, waking the market from its numb perception of “physical energy security.” For China, this chasm means the risk exposure from relying on imported oil has been infinitely enlarged, and coal, as the cornerstone of self-controllable energy, has never been more important.
The coal industry has entered a new stage of “rigid supply, resilient demand, and value reshaping.” January–February 2026 data clearly shows: the supply-demand gap is forming, inventories are being reduced, and the price bottom has already emerged.
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