Palm declines due to Dalian palm's weakness

The price of Malaysian palm oil futures fell on Monday due to the weakness of Dalian palm oil.

At midday, the benchmark palm oil contract on Bursa Malaysia's Derivatives exchange for February delivery fell 71 ringgit or 1.41% to 4,982 Ringgit ($1,115.79).

The previous session saw a 2.5% increase in the contract.

A Kuala Lumpur based trader explained that the weakness in the palm market is due to spread adjustments against Dalian's Palm Olein.

Dalian's palm oil contract, which is the most active contract in Dalian, fell by 0.84% while soyoil prices dropped by 1.35%. Chicago Board of Trade soyoil prices were up by 0.15%.

As rival edible oils compete to gain a share of global vegetable oil market, palm oil monitors the price movement of their competitors.

The palm ringgit's trade currency strengthened by 0.07% against dollars, increasing the price of the commodity for buyers who hold foreign currencies.

The oil prices rose after the fighting between Russia, Ukraine and other countries intensified at the weekend. However, concerns over fuel demand in China - the second largest consumer of petroleum products - and forecasts for a global surplus of oil weighed heavily on the markets.

Palm oil is a better option as a biodiesel feedstock because crude oil futures are stronger.

Chicago soy futures rose in a second session amid concerns that China could reduce imports of used cooking oil - a cheap feedstock that is used by many U.S. producers of biofuels instead of soyoil produced domestically.

Technical analyst Wang Tao believes that palm oil could revisit its high of 5,202 Ringgit per metric tonne of Nov. 11, as the significant gain from the low of 4,826 Ringgit on Nov. 14, suggests a return to the upward trend.

(source: Reuters)