Palm oil hits 3-month low on rising output, slow export demand

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KUALA LUMPUR (Feb 17): Malaysian palm oil futures dropped to their lowest in three months on Friday, on expectations of rising production and slow export demand.

Benchmark palm oil futures for May delivery on the Bursa Malaysia Derivatives Exchange were down 2.4% at RM2,859 (US$642.33) a tonne in the evening. Earlier, they hit RM2,851, the lowest since Nov 18.

Traded volumes stood at 80,151 lots of 25 tonnes each at the end of the trading day

"Fundamentally production is inching up but exports are uncertain," said a Kuala Lumpur-based futures trader.

"The trading band in the short term should be RM2,800–RM3,000," he said, while adding it was too early to determine whether this was the start of a price-declining phase.

In recent weeks, palm oil prices have reached their highest in more than four years as market supplies are tight on low production levels.

Palm's fresh fruit yields are still suffering the effects of a crop-damaging El Nino, but are expected to recover by the second-half of the year, which is weighing on benchmark prices, according to leading industry analysts.

Another trader added high palm oil prices had seen many buyers switch to soyoil, causing a sharper decline in prices of the tropical oil in the second half of Friday's trade.

"Demand will switch to soyoil in a big way," he forecast.

Demand for palm oil in the first-half of February declined from the corresponding period last month, cargo surveyor data showed.

Societe Generale de Surveillance shipment data showed a 3.6% fall in exports, while Intertek Testing Services saw a 1.4% rise.

Palm oil is expected to seek a support at RM2,879 per tonne, and then either hover above this level or bounce towards a resistance at RM2,959, said Wang Tao, a Reuters market analyst for commodities and energy technicals.

In competing vegetable oils, the May soybean oil contract on the Chicago Board of Trade slipped as much as 1.7%, while the May soybean oil contract on the Dalian Commodity Exchange lost up to 2.1%.

The May contract for Dalian palm olein fell as much as 3.2%.

Palm, soy and crude oil prices at 1039 GMT

Contract          Month    Last   Change     Low   High  Volume
MY PALM OIL       MAR7     3095   -57.00    3088   3150    1123
MY PALM OIL       APR7     2955   -73.00    2943   3000   13597
MY PALM OIL       MAY7     2858   -70.00    2851   2908   32080
CHINA PALM OLEIN  MAY7     5918  -194.00    5906   6054  735698
CHINA SOYOIL      MAY7     6690  -146.00    6684   6826  559224
CBOT SOY OIL      MAR7    32.97    -0.55   32.94  33.65   16273
INDIA PALM OIL    FEB7   557.50    -4.80  556.30  560.8    1218
INDIA SOYOIL      FEB7    678.9    -1.60   677.2  679.4     630
NYMEX CRUDE       MAR7    53.20    -0.16   53.14  53.52   21673

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 = RM4.4510)
(US$1 = 67.0500 Indian rupees)
(US$1 = 6.8640 Chinese yuan)