Palm oil no longer follows rival oils in price, and Indian imports are down.
Malaysian palm oils futures continued to decline for a third consecutive session on Wednesday. This was due to the drop in prices of vegetable oils that compete with palm oil and a decrease in India's imports.
The benchmark palm-oil contract for delivery in November on Bursa Malaysia's Derivatives exchange closed at 3888 ringgit (US$893.79) a metric ton, down by 1.09%.
A Kuala Lumpur-based trader stated that "the futures are tracking the external market drop in rival oils, as well as taking note of the drop in import from India because of high prices."
A palm oil trader said that the strengthened ringgit had made palm oils significantly less competitive.
Dalian's palm oil contract dropped 1.4%, whereas its most active soyoil contract declined 0.9%. Chicago Board of Trade fell 0.41%.
As they compete to gain a share of the global vegetable oil market, palm oil monitors price movements for related oils.
A survey revealed that Malaysian palm oil inventories were expected to be at their highest level in six months by the end of August, due to a lacklustre demand for exports.
Five dealers reported on Tuesday that India's imports of palm oil in August were down 27% compared to a month earlier due to ample stocks. Negative margins also prompted refiners reduce purchases of tropical oil.
The contract could be affected by lower purchases of vegetable oil by the world's largest importer. This would lead to increased stocks in Indonesia and Malaysia which are key producers.
The Malaysian Ringgit, the palm oil's trade currency, increased by 0.34% in value against the US dollar. Palm oil becomes less appealing to foreign currency holders when the ringgit is stronger.
China announced on Tuesday that it will launch an anti-dumping probe into canola imported from Canada after Ottawa imposed tariffs on Chinese Electric Vehicles, sending the prices of domestic rapeseed futures to their highest level in a month.
The oil prices dropped slightly on Wednesday. They are now at their lowest level since December, after plummeting by more than 4% on Tuesday. This is due to signs of a weakening global economy, a lacklustre demand for oil, and the expectation of an end of the dispute that has stopped Libyan exports.
Palm oil is less appealing as a biodiesel source due to the weaker crude oil futures. $1 = 4.3500 Ringgit (Reporting and editing by Rashmi aich and Varun h k)
(source: Reuters)
