Palm oil falls on Dalian crude oil, weakening it

Malaysian palm futures dropped on Thursday, ending a five session rally. Pressured by lower Dalian oil and lower crude oil prices, sparked by the talks to end Ukraine-Russia's war, they were pushed down by weaker Dalian oil.

At midday, the benchmark palm oil contract on Bursa Malaysia's Derivatives exchange for April delivery fell 63 ringgit or 1.36% to 4,558 Ringgit ($1,023.35) per metric ton.

Anilkumar bagani, head of commodity research at Mumbai's Sunvin Group, said that crude palm oil futures fell following a selloff on energy markets, after U.S. president Donald Trump launched diplomatic efforts to end Ukraine's war.

He said that the easing of the Ukraine and Russia war could mean the logistics costs are reduced, and the uncertainty around the Black Sea Sunflower Oil trade is resolved. This would allow the flow of oil to reach key destinations markets.

He added that the Black Sea Corridor is expected to see a decrease in freight rates, which will likely lead to a drop in sunflower oil and, consequently, put pressure on palm oils prices.

Prices fell as a result of expectations that a possible peace deal between Ukraine & Russia could mean an end to sanctions that had disrupted the supply flow. Trump's plan to introduce reciprocal duties also stoked inflation fears.

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

Trump began discussions on Wednesday with the Russian President Vladimir Putin as well as the Ukrainian President Volodymyr Zelenskiy in order to start talks about ending the conflict in Ukraine. China has also called for peacekeeping measures to end the conflict.

Bagani noted that the downward pressure on the Chinese palm olein market and the decline in soyoil was also evident.

Dalian's palm oil contract, which is the most active contract, fell by 2.03% while soyoil prices dropped by 2.57%. Chicago Board of Trade soyoil prices were down by 0.11%.

As palm oil competes to gain a share in the global vegetable oils industry, it tracks the price changes of competing edible oils.

The palm ringgit's trade currency strengthened by 0.36% in relation to the dollar. This made the commodity more costly for buyers who hold foreign currencies.

Technical analyst Wang Tao stated that palm oil could retest its support at 4,621 Ringgit per metric tonne. A break below this level would open the door to a range of 4,523 to 4,580 Ringgit.

(source: Reuters)