Palm oil prices fall on weak Dalian, Chicago and Indian demand

Malaysian palm oils futures dropped more than 2 percent on Monday. This was their largest daily decline in more than one month. The market was also affected by the weakness of rival Dalian and Chicago oil, as well as a weak demand from India, its top buyer.

The benchmark May palm oil contract on Bursa Malaysia's Derivatives exchange lost 104 Ringgit or 2.23% to close at 4,560 Ringgit ($1,034.48) per metric ton.

A Kuala Lumpur based trader said that sharp losses in rival oils had dampened the market's sentiment.

Dalian's palm-oil contract dropped 1.64% while its most active soyoil contract rose 0.15%. Chicago Board of Trade soyoil prices were down by 0.61%.

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

An industry group said that the demand for palm oil by India, its top buyer, in the marketing year 2024/25 ending in October, could drop to 7.5 million tonnes, the lowest level in five years. This is because the rising price of palm oil over other oils such as soyoil or sunflower oil has pushed refiners toward more affordable alternatives.

Four trade sources reported that Indian refiners cancelled orders for 100,000 tonnes of crude palm oil due for delivery in March or June, citing a rise in Malaysian benchmark prices and negative margins for refining in India.

Two government sources say that India will likely raise import taxes for vegetable oils for the 2nd time in less than 6 months in order to support thousands of oilseeds farmers who are suffering from a collapse in domestic oilseeds prices.

Malaysian palm oil stock levels are expected to drop to 1.5 million metric tonnes by the end February. This is their lowest level for nearly two years as floods have affected production and Ramadan has increased demand.

(source: Reuters)