Swaps lose $5/mt on oil price crash

European API2 (CIF ARA) coal swaps were shorn of around $5/mt Tuesday after a mid-afternoon crash in crude oil prices caused a spurt of late paper selling. Traders said that after a choppy start to the session with prices seesawing, API2 and API4 contracts had dropped on average $6/mt lower before finding support to close around $5/mt down day-on-day. At the close of trading, Platts assessed the API2 Cal-09 contract at $200.50/mt, down $4.50/mt day-on-day.
The corresponding API4 (FOB Richards Bay) contract was marked at $172/mt, down $4/mt. “I don’t think anyone’s trading any fundamentals on coal, we’ve broken the bull trend now and we have to
consolidate until we establish what the next trend is,” said a paper trader. “Because of the high numbers and the big price moves we’ve had, the consolidation is going to be extremely volatile and quite lengthy until it settles.” After a soft opening, API2 swaps crept up by around $2/mt in morning trading with traders citing rising crude oil and higher bids in the physical coal market. Contracts retraced at lunchtime with one market participant heard selling Q4-08 and Cal-09 on the API2 “quite aggressively” according to a utility trader. A slight rally which took API2 prices back to near closing prices mid-afternoon was abruptly halted by news of sinking crude oil prices and coal paper prices nosedived. “The market is definitely looking for direction and new inputs to trade,” commented one Swiss-based trader, adding that there was uncertainty as to how much a tight supply situation in the Asian coal market had already been priced into European paper contracts. The API2 Cal-09 opened a dollar softer at $204/mt but edged up to an intraday high of $206/mt before being heard done at $204.25/mt mid-afternoon. It was then sold down to the $199/mt level before finding support and edging up to the $200.50/mt level. In the physical market, there was very little activity although a September-loading 50,000 mt DES cargo of generic origin coal for delivery in Amsterdam/Rotterdam was given at $218/mt on globalCOAL early on, up $4.50/mt on a similar trade done on the trading platform the previous day. In the offscreen, over-the-counter market, a DES ARA September-loading 50,000 mt generic-origin cargo was heard traded at $215/mt. Sources said that bids were pulled in the physical market once news of the crude oil drop filtered through. Platts assessed the prompt month August CIF ARA price at $207/mt, down $4/mt,

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