BEIJING - China's most active thermal coal futures  prices fell more than 4 percent in morning trading on Wednesday, on track for the biggest one-day drop since November 2016, following news of government intervention to cool the red-hot market.

Thermal coal futures fell to 588.8 yuan ($92.37) per tonne by 0250 GMT, extending a more than 3 percent fall in the overnight trading session as investors rushed to close out long positions and pile on short bets.

Reuters reported on Tuesday that China's state planner ordered utilities this week to stop stockpiling thermal coal and told miners to slash prices, citing sources, in the government's first direct intervention since mid-2016.

Total open interest for September contracts rose to 415,108 lots, or 41.5 million tonnes, from 400,336 lots on Tuesday.

In a meeting with utilities, miners and port officials, the National Development and Reform Commission (NDRC) encouraged utilities to halt buying in the next two to three weeks or reduce inventories.

The NDRC also asked miners to bring spot coal prices back under 570 yuan ($90) per tonne by June 10, from current levels of as much as 650 yuan per tonne, the sources said.

Some traders worried that the direct intervention could cause problems further out as summer approaches and power consumption rises.

"NDRC has ordered power plants to stop buying coal as of now. But pent-up demand from this month and expectation of tight rail transportation capacity in summer could lead to supply crunches," a coal trader based in Hefei, southern Anhui province said.

(Reporting by Meng Meng and Aizhu Chen; editing by Richard Pullin)

© Reuters News 2018