Palm edges down on slower demand; trade range-bound

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KUALA LUMPUR (Aug 14): Malaysian palm oil futures fell slightly in early trade on Tuesday, in line for a fourth straight day of losses, as sentiment declined on a weaker demand outlook.

The benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange edged down 0.1% at RM2,202 (US$537.73) a tonne at the midday break, but was largely range-trading in the first half of trade.

Palm had declined to a one-week low in its previous session when it saw its sharpest daily decline in a month.  

Trading volumes stood at 16,168 lots of 25 tonnes each at the midday break.

"Palm's price range is down mainly because Indonesia's physical prices are cheaper than Malaysia's," said a Singapore-based futures trader, explaining that this led to slower Malaysian demand.

Indonesia's crude palm oil price on a free-on-board basis was last at US$530 per tonne on Monday versus Malaysia's equivalent price at US$540, according to Eikon data.

Another futures trader in Kuala Lumpur added the market was also concerned that a sharp drop in the Indian rupee would dampen export demand, weighing on palm prices.  

India is the world's biggest importer of edible oils, and a depreciating local currency reduces its ability to buy palm oil. The Indian rupee on Monday touched an all-time low of 69.62 per dollar in early trade tracking other weaker emerging market currencies and on concerns of a spill-over from a crisis-hit Turkey.

It was last up 0.3% at 69.81 against the dollar around Tuesday noon.

Malaysia's palm oil exports rose 6.8% in July from June to 1.21 million tonnes, according to industry regulator data.

Palm oil may fall into a range of RM2,165-2,179 per tonne, as it has completed a bounce, or the first round of this bounce from RM2,140, according to Reuters market analyst for commodities and energy technicals Wang Tao.

In other related oils, the Chicago December soybean oil contract was down 0.4%, while the January soybean oil contract on China's Dalian Commodity Exchange gained 0.6%.

Meanwhile, the Dalian January palm oil contract edged up 0.1%.

Palm oil prices are impacted by movements of other edible oils, as they compete for a share in the global vegetable oils market.

Palm, soy and crude oil prices at 0453 GMT

Contract          Month    Last  Change     Low    High  Volume
MY PALM OIL       AUG8        0   +0.00 0 0 0
MY PALM OIL       SEP8     2185   -3.00    2185    2201     259
MY PALM OIL       OCT8     2202   -2.00    2201    2217    6694
CHINA PALM OLEIN  JAN9     4922   +6.00    4896    4932  144428
CHINA SOYOIL      JAN9     5868  +34.00    5822    5878  223076
CBOT SOY OIL      DEC8    28.55   +0.00   28.51   28.65    1995
INDIA PALM OIL    AUG8   596.00   +0.10  594.80   596.7      36
INDIA SOYOIL      AUG8    734.2   +0.40     732   734.2    1100
NYMEX CRUDE       SEP8    67.49   +0.29   67.35   67.58   16161

Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in US cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
India soy oil in Indian rupee per 10 kg
Crude in US dollars per barrel

(US$1 = RM4.0950)
(US$1 = 69.8200 Indian rupees)
(US$1 = 6.8819 Chinese yuan)