By Leon Westgate
Crude oil continues to track the equity markets and the dollar. Friday saw prices fall very sharply, with front month WTI trading down to $65.50 and below its 200-day MA for the first time since May 2009.

Crude oil continues to trade towards the bottom end of a range that it has been in since mid-October. Friday’s weakness briefly looked like prices would break lower, however the recovery in US equities on Friday afternoon came to the rescue, seeing prices recover to close back above $71/bbl.

As with the base metals, Crude oil prices opened higher overnight before coming back under a bit of pressure heading into the afternoon. Short term the dollar and equities will remain key, with the market waiting to see how the US markets react to Friday afternoon’s recovery in the equity markets, particularly after an inconclusive G7 meeting over the weekend.

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Coal came under pressure on Friday amid weak physical demand. API2 for Q2-10 fell $1.25/mt to $77.25. API4 for Q2-10 the fell $0.75 to $80.25/mt. A bout of colder weather on the way in the UK and Northern Europe should help prices remain firm; however demand from China continues to be lackluster.

For example, in China coal prices at Qinhuangdao fell sharply - dropping 3.8% on the week - as demand continued to ease amid warmer weather conditions. The drop in prices last week represents the biggest slump in over a year.

Courtesy: Standard Bank

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