KUALA LUMPUR: Malaysian palm oil futures fell to a one-week low on Wednesday. Losses have been recorded in soy and crude oil. Price sensitive buyers usually opt the rival edible oil so weaker soy oil prices could satiate appetite for palm.
The benchmark January contract on the Bursa Malaysia Derivatives Exchange fell to 2,243 ringgit, the lowest since Oct. 29 in late trade, before settling down 2.4 percent at 2,252 ringgit ($674) per tonne by Wednesday’s close.
Total traded volume stood at 54,548 lots of 25 tonnes, above the usual 35,000 lots.
The discount of free-on-board refined palm olein to Argentina soyoil narrowed to around $70 on Tuesday from around $130 at end-August.
“The time is right for a healthy correction. The gap has been narrowing and we are worried about demand,” said a trader with a local commodities brokerage in Kuala Lumpur.
The US soyoil contract for December which is commonly tracked by palm oil tumbled 2 percent in late Asian trade, while the most active January soybean oil contract on the Dalian Commodities Exchange fell 2.5 percent.
“Demand from India, China and the Middle East has been tepid, while our prices were skyrocketing. Of course, expectations for reduction in output and end-stocks would help (prices), but to sustain above 2,300 ringgit more demand is needed,” the trader added.
“Based on the current supply and demand scenario, the market should be somewhere close to 2,250-2,270 ringgit.”
Bouts of dry weather earlier this year in Malaysia and Indonesia, the world’s top two oil palm growers, are widely expected to curb supply into 2015.
“We believe 2015 crude palm oil supply growth will be muted compared to 2014 as planters had a relatively good harvest in 2014,” Maybank Investment Bank analyst Ong Chee Ting said in a note on Wednesday, adding that dryness was seen in Malaysia and Sumatra during Feb-March, and in southern Sumatra and central Kalimantan during Sept-Oct.
“We maintain our “neutral” view on the sector with an unchanged 2015-16 crude palm oil average selling price of 2,600 ringgit a tonne for now,” he said, adding that a key downside risk to the forecast is a further decline in crude oil prices.
Brent oil dropped to a new four-year low below $82 a barrel on Wednesday, a fifth straight session of losses, as weak economic data from top energy consumer China intensified worries about demand as a global supply glut grows
However, a weaker local currency helped cap losses, making the ringgit-denominated feedstock cheaper for overseas investors and refiners. The Malaysian ringgit fell another 0.3 percent to 3.3410 against the greenback on Wednesday, its weakest since Feb. 11.
Technicals showed palm oil may find support at 2,259 ringgit per tonne, as it has broken the earlier support at 2,295 ringgit.
Elsewhere, SCB Group on Tuesday brokered the first trade in CME Group’s newly listed Malaysian Palm Olein Calendar Swaps.
Markets, oil drop in Asia but bitcoin edges towards $50,000
HONG KONG: Markets fell in Asia on Friday in holiday-thinned trade with investors awaiting developments in US stimulus talks, while...
