Palm oil prices fall as rival oils rise, and Indian imports decline.
Malaysian palm futures continued to decline on Wednesday. This was due to a fall in the prices of competing vegetable oils, and a decrease in India's imports of palm oil.
By midday, the benchmark palm oil contract on Bursa Derivatives exchange for November delivery was down by 0.97% at 3,893 Ringgit ($895.97). It was on course to drop for a third consecutive session.
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 oil significantly less competitive.
Dalian's palm oil contract dropped 1.58%, while the most active soyoil contract declined 0.57%. Chicago Board of Trade fell 0.29%.
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 of palm oils in Indonesia and Malaysia which are key producers.
The Malaysian Ringgit, the palm oil's trade currency, increased by 0.46% 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.
On Wednesday, oil prices continued to fall, following a drop of over 4% on Tuesday, as a result of expectations that the political dispute which had halted exports from Libya could be resolved, and due to concerns about a slowing global demand growth.
Palm oil is less appealing as a biodiesel feedstock due to the weaker crude oil futures.
According to Wang Tao, a technical analyst, palm oil could drop to 3,864 Ringgit per metric tonne, after forming a double top around 4,003 Ringgit.
(source: Reuters)
