Palm oil hits near 4-month low on rising output, weak demand

-A +A

KUALA LUMPUR (Feb 23): Malaysian palm oil futures fell on Thursday evening, charting a fifth session of losses in six and hitting their lowest in nearly four months as concerns persisted over rising production and weak exports.

Benchmark palm oil futures for May on the Bursa Malaysia Derivatives Exchange declined 1% to RM2,782 (US$625.59) a tonne at the close of trade. The contract dropped to as low as RM2,743 in the second half of trading, its weakest since Nov 4.

Palm had gained about 1% on Wednesday, snapping four previous sessions of losses, but lost nearly 9% since the start of last week.

Traded volumes stood at 95,844 lots of 25 tonnes each on Thursday evening.

"After four days of drop the market pulled back, but now it is coming down again. People feel that there is more production coming, and demand is slowing down," said a trader from Kuala Lumpur.

"There is also too much pressure from soyoil," he said.

Lower prices of soyoil make it more attractive as the preferred edible oil in top consumers such as China and India.

Palm oil demand for the full month of February is expected to fall after shipments rose in January over the Chinese Lunar New Year celebrations.

Exports declined 0.8% in the Feb 1–20 time period from the same period last month, according to data from cargo surveyor Intertek Testing Services.

However, data from another cargo surveyor, Societe Generale de Surveillance, showed that demand rose 1.7%.

Output is forecast to rise in February as palm's fresh fruit yields are seen recovering from the El Nino's crop damaging effects. Government data showed it had declined 13.4% in January, its sharpest drop in a year and its lowest level since March.

Palm oil may test a support at RM2,750 per tonne, a break below which could cause a loss to the next support at RM2,703, said Wang Tao, a Reuters market analyst for commodities and energy technicals.

In related vegetable oils, soybean oil on the Chicago Board of Trade fell 0.3%, while the soybean oil contract on the Dalian Commodity Exchange declined 0.8%.

The May contract for palm olein on China's Dalian Commodity Exchange declined 1.1%.

Palm, soy and crude oil prices at 1045 GMT

Contract          Month    Last  Change     Low    High  Volume
MY PALM OIL       MAR7     2946  -77.00    2885    2996    2605
MY PALM OIL       APR7     2836  -40.00    2790    2877    8544
MY PALM OIL       MAY7     2782  -27.00    2743    2810   44068
CHINA PALM OLEIN  MAY7     5790  -62.00    5760    5918  648982
CHINA SOYOIL      MAY7     6584  -52.00    6560    6676  396318
CBOT SOY OIL      MAR7    32.61   -0.11   32.43   32.91    3749
INDIA PALM OIL    FEB7   544.50   -4.10  539.70   544.5    1164
INDIA SOYOIL      MAR7      652   -2.80   648.5   652.6   28590
NYMEX CRUDE       APR7    54.31   +0.72   53.87   54.46   99287

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 = RM4.4470)
(US$1 = 66.8250 Indian rupees)
(US$1 = 6.8762 Chinese yuan)