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European thermal coal market slow to react to crude oil surge

London — The European physical thermal coal market showed little reaction to attacks on Saudi Arabia's Abqaiq processing facility and Khurais oil field, despite surging crude oil prices, market sources said Monday.

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Crude futures jumped by over 15% Monday morning, before retreating to trade around 8%-9% higher by noon London time. CIF ARA thermal coal futures were somewhat more responsive than physical prices to the events, but still suggested a muted response to the loss of half of Saudi Arabia's crude production Saturday.

The year-ahead Cal-20 contract opened at $70/mt on the Intercontinental Exchange, up $1.55/mt from Friday's close, and traded as high as $70.25/mt before settling into a rangebound pattern Monday morning.

Market sources said the price increase was unsurprising, given the similar upward movements in European gas and power pricing, but participants in the physical market would be waiting for the futures to steady before making a move.

"For now it has kind of killed liquidity as no one wants to offer a full physical cargo and then have paper fly up again if something else happens," a European coal broker said.

Coal fundamentals were too weak for any sustained longer term impact on the physical market, the source said, highlighting the oversupply in Europe.

"Short term sure, there is going to be a tracking higher but I doubt it will last long," the source said. "Paper has already stabilized this morning."

-- Joseph Clarke, joseph.clarke@spglobal.com Jeffrey McDonald, jeffrey.mcdonald@spglobal.com

-- Edited by James Burgess, newsdesk@spglobal.com