Palm oil drops nearly 2% on technical selling

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KUALA LUMPUR (May 21): Malaysian palm oil futures closed nearly 2% down on Tuesday, retreating from a three-week high hit in early trade as technical selling and concern over higher than expected production weighed on prices. 

The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange finished 1.95% down at 2,057 ringgit (US$491.58) a tonne for its sharpest daily decline in more than a fortnight. The drop was also palm's first day of losses in six.

"The market declined on technical selling as it was overbought, after gaining for five sessions," said one Kuala Lumpur based trader. 
 
Another trader said palm prices were also pressured by concern that May output would be higher than expected. "May's full-month output (versus April) might be flat," the trader said. Previous expectations were for output to decline.

Palm oil output in Malaysia, the world's second-largest producer, last reported that production fell 1.4% from the previous month to 1.65 million tonnes in April.

Flat or rising stocks from April to May, however, could add to already high inventory levels, which have kept pressure on prices since the final quarter of last year.

Meanwhile, Malaysian palm oil shipments for May 1-20 rose between 5.6% and 13%, compared with the same period last month, according to data from cargo surveyors Societe Generale de Surveillance, Intertek Testing Services and AmSpec Agri Malaysia.

In related oils, the Chicago July soybean oil contract rose 0.1% on Tuesday, while July soyoil on the Dalian Commodity Exchange was down 0.9%. 

The Dalian May palm oil contract was trading flat at 1137 GMT.

Palm oil prices are affected by movements in other edible oils that compete in the global vegetable oils market.
    
 Palm, soy and crude oil prices at 1137 GMT

 Contract          Month    Last   Change     Low   High  Volume
 MY PALM OIL       JUN9     2016   -41.00    2016   2060     478
 MY PALM OIL       JUL9     2049   -41.00    2038   2098    6840
 MY PALM OIL       AUG9     2063   -41.00    2051   2115   18255
 CHINA PALM OLEIN  SEP9     4486    +0.00    4462   4508  417634
 CHINA SOYOIL      JUL9     5334   -48.00    5334   5334       2
 CBOT SOY OIL      JUL9    27.53    +0.03   27.47  27.79    6300
 INDIA PALM OIL    MAY9   521.80    -3.50  521.00  526.6     701
 INDIA SOYOIL      JUN9      741    +1.65  739.25    742    7260
 NYMEX CRUDE       JUN9    63.58    +0.48   63.06  63.60    1340

 Palm oil prices in Malaysian ringgit per tonne
 CBOT soy oil in U.S. 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 U.S. dollars per barrel

 

(US$1 = 4.1845 ringgit)
(US$1 = 69.6980 Indian rupees)
(US$1 = 6.9060 Chinese yuan)