Palm oil continues to decline against weaker competitors; export data cap losses

The price of Malaysian palm oils futures dropped for the second session in a row on Tuesday. This was due to the weakness of rival edible oil and crude oil, but robust export data helped limit this fall.

The benchmark palm-oil contract for December delivery at the Bursa Derivatives exchange closed down by 1.04% to 4,268 Ringgit ($993.26) per metric ton. It has fallen 1.89% over two sessions.

David Ng, a proprietary trading at Kuala Lumpur's Iceberg X Sdn. Bhd., stated that the market was under pressure due to overnight weakness in Chicago soybean oil and lower Dalian Palm Olein prices.

He said that the weakness in crude oil prices also impacted palm prices.

Dalian's palm oil contract and most active soyoil contract both fell by 2.2%. Chicago Board of Trade soyoil prices were down by 0.62% due to persistent weakness of the CBOT soybean contracts.

He said: "I believe (the drop in Dalian oil) is mainly caused by external factors, driven by the weakness of crude oil and lower U.S. beans oil prices."

As they compete to gain a share in the global vegetable oil market, palm oil monitors prices of competing edible oils.

He said that the exports have been strong so far, which has kept losses to a minimum.

Exports of Malaysian Palm Oil Products rose between 14 and 15 % from Oct. 1-15 compared to the same period last month.

The oil price dropped more than 4%, to a two-week low. This was due to the weakening demand outlook. Also, after a report in the media that Israel would not be willing to strike Iranian oil targets. This eased fears of a disruption to supply.

Palm oil is less appealing as a biodiesel feedstock due to the weaker crude oil futures.

The palm ringgit's currency has weakened by 0.37% compared to the U.S. Dollar, making it cheaper for foreign buyers.

(source: Reuters)