Palm oil drops on weaker rival oils and a bearish outlook
The price of Malaysian palm oils futures plummeted on Thursday. This ended two sessions of gains as analysts and the weakness in other oils weighed it down.
By midday, the benchmark May palm oil contract on Bursa Malaysia's Derivatives exchange had fallen 96 ringgit or 2.08% to 4,515 Ringgit ($1,016.43) per metric ton.
Paramalingam Supramaniam is the director of Selangor-based brokerage Pelindung Bestari.
He added that the expectation of a recovery in production during the second half this year increased the pressure on the contract.
Analysts said that a recovery in palm oil production as well as lower imports from rate-sensitive consumers will drive down prices, reducing the premium for tropical oil over its rivals. This is happening even though top producer Indonesia increases biodiesel, they told a Kuala Lumpur conference this week.
He said that heavy rains in east Malaysia are keeping the production low.
Dalian's palm oil contract, which is the most active contract in Dalian, dropped by 1.07%. Chicago Board of Trade Soyoil Prices fell by 0.61%.
As palm oil competes to gain a share in the global vegetable oil market, it tracks price changes of competing edible oils.
According to Intertek Testing Services, the exports of palm oil-based products from Malaysia in the period February 1-25 are expected to fall by 2.7%. However, independent inspection company AmSpec Agri Malaysia estimated exports rose 1.2% month-on-month.
Palm oil is neutral between 4,542 and 4,608 Ringgit per metric tonne, but an escape from this range could indicate a direction.
(source: Reuters)
