Palm oil slides as higher output, falling demand expected

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KUALA LUMPUR (Feb 27): Malaysian palm oil futures fell on Monday, after hitting a near one-week high as traders sold on expectations of rising output and weakening export demand. 

Benchmark palm oil futures for May on the Bursa Malaysia Derivatives Exchange closed down 1.85% at 2,754 ringgit (US$620.69) a tonne, having hit 2,815 ringgit earlier in the day, its highest level since Feb 21. 

Traded volumes stood at 52,131 lots of 25 tonnes each.

Palm oil output is expected to recover by the second quarter of the year, while exports so far in February have declined after a surge in demand the previous month due to Lunar New Year celebrations in China, when consumption typically rises.

Palm has fallen for two consecutive weeks and has lost more than 8% since Feb 13.

"The market has resumed selling which started two weeks ago, but is trading in a range without any bullish indicators as it looks for new leads," said a futures trader from Kuala Lumpur.  

Demand would be the key factor to support palm oil prices, as output is largely expected to recover this year from the dry weather effects of the crop-damaging El Nino, the trader said.

Palm oil shipments from Malaysia, the world's second-largest palm oil producer after Indonesia, however, fell 1.9% between Feb 1 and Feb 25 from the same period last month, according to data from cargo surveyor Intertek Testing Services.

Palm oil may retrace to support at 2,766 ringgit per tonne, as it has failed to break resistance at 2,821 ringgit, according to Wang Tao, Reuters technical market analyst for commodities and energy.
In related vegetable oils, soybean oil on the Chicago Board of Trade was down 0.06%, while soybean oil on the Dalian Commodity Exchange rose 0.03%.

The May contract for palm olein on China's Dalian Commodity Exchange gained 0.2%.


Palm, soy and crude oil prices at 1036 GMT

Contract Month Last Change Low High Volume
MY PALM OIL MAR7 2919 -57.00 2919 2964 781
MY PALM OIL APR7 2800 -58.00 2800 2869 2324
MY PALM OIL MAY7 2751 -52.00 2751 2815 26699
CHINA PALM OLEIN MAY7 5806 +14.00 5784 5868 496346
CHINA SOYOIL MAY7 6578 +2.00 6562 6624 331488
CBOT SOY OIL MAY7 32.65 -3.10 32.65 32.86 7819
INDIA PALM OIL FEB7 544.40 -3.10 543.80 547 902
INDIA SOYOIL MAR7 655.2 -0.50 654.25 659.8 21180
NYMEX CRUDE APR7 54.35 +0.36 53.94 54.58 73069

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 = 4.4370 ringgit)
(US$1 = 66.6900 Indian rupees)
(US$1 = 6.8750 Chinese yuan)