KUALA LUMPUR (Oct 15): Malaysian palm oil futures slipped to a more than three-week low on Wednesday, giving up gains made in the previous session as crude and soy oil prices slumped, and as export demand remained lacklustre in the first half of October.
Brent crude fell to a fresh 47-month low on Wednesday before recovering to just above $84 a barrel as faltering global growth curbed demand for fuel at a time of heavy oversupply.
Soy markets also fell after a report from the U.S. Department of Agriculture showed that the record soybean harvest was progressing faster than market expectations, paving the way for bumper supplies of edible oils that may overwhelm demand.
"Selling continued in the afternoon on the back of weakness in crude oil. When crude fell, soybean oil fell, and palm also fell," said a trader with a foreign commodities brokerage in Malaysia.
"The main thing that is pressuring the palm market right now is fear of rising stocks and weak energy markets."
The benchmark December contract on the Bursa Malaysia Derivatives Exchange fell to 2,111 ringgit in late trade, the lowest since Sept. 23, before closing 1.3 percent down at 2,134 ringgit ($651) per tonne.
Total traded volume stood at 59,068 lots of 25 tonnes, above the average of 35,000 lots.
Technicals showed palm is expected to drop to 2,105 ringgit per tonne, as it has broken a support at 2,150 ringgit, said Reuters market analyst Wang Tao.
Exports of Malaysian palm oil products during Oct. 1-15 slid 16.5 percent from the same period a month earlier to 626,482 tonnes, cargo surveyor Intertek Testing Services showed.
Another cargo surveyor Societe Generale de Surveillance reported exports for the same period fell 15.5 percent.
However, the fall was less steep compared to the first 10 days of the month as imports from Europe and China firmed.
Some traders were optimistic that palm prices may bottom in October before picking up again as output begins to taper off and wet weather slows down harvesting.
"The external market is weak, so we expect palm oil fundamentals for October to be weak as well," said a second Kuala Lumpur-based trader.
"But if you start looking at November and December, production will start dropping. October will be the worst month. It's only going to get better."
An extension of tax-free exports of crude palm oil from the world's top producers could also help stoke demand, market players said.
Malaysia, the world's No.2 producer, announced on Friday it would extend an export duty exemption on the crude grade until December, while Indonesia is expected to keep its own export tax at zero for a second month in November.
The U.S. soyoil contract for December shed 1.5 percent in late Asian trade, while the most active January soybean oil contract on the Dalian Commodities Exchange dropped 0.9 percent.
Palm, soy and crude oil prices at 1009 GMT
Contract Month Last Change Low High Volume
MY PALM OIL OCT4 0 +0.00 2191 0 0
MY PALM OIL NOV4 2152 -28.00 2128 2172 2807
MY PALM OIL DEC4 2134 -29.00 2111 2158 29120
CHINA PALM OLEIN JAN5 5244 +6.00 5222 5324 1282604
CHINA SOYOIL JAN5 5920 -56.00 5914 5974 342726
CBOT SOY OIL DEC4 32.37 -0.80 32.22 32.87 10290
INDIA PALM OIL OCT4 445.80 -0.80 444.40 449.10 1159
INDIA SOYOIL OCT4 589.10 +0.30 588.00 592.50 13840
NYMEX CRUDE NOV4 80.74 -1.10 80.37 82.45 52028
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
(1 US dollar = 3.277 Malaysian ringgit)
(1 US dollar = 6.1259 Chinese yuan)
(1 US dollar = 61.41 Indian rupee)