VEGOILS - Palm erases early gains, speculative purchasing and short covering cap losses

Malaysian palm futures reversed gains and closed lower on Monday as crude oil prices fell. However, speculative purchases and short-covering helped limit the losses.

The benchmark palm-oil contract for December delivery at Bursa Malaysia's Derivatives exchange fell 36 ringgit or 0.83% to 4,314 Ringgit ($1,005.36) per metric ton.

The contract gained 0.51% earlier during the lunch break.

Paramalingam Supramaniam is the director of Selangor brokerage Pelindung Bestari.

"We are seeing lower estimates for Malaysian Production, but Indonesian Production is rocketing forward with a double-digit growth. He said that this could limit gains when the speculative purchases stop.

Dalian's soyoil contract, which is the most active contract, fell by 0.63% while palm oil contracts rose by 0.32%.

The Chicago Board of Trade soyoil price fell by 1.59% following the drop in CBOT soybeans contracts on expectations of an unprecedented U.S. harvest.

As rival edible oils compete to gain a share of global vegetable oil market, palm oil monitors the price movement of their competitors.

The palm ringgit (the currency of trade) fell 0.16% in value against the US dollar.

The oil market on Monday erased all the gains made last week as China's stimulus plan failed to inspire investors. Meanwhile, the market was still on edge over possible Israeli attacks on Iranian infrastructure.

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

The Solvent Extractors' Association of India reported that India's imports of palm oil in September dropped by almost a third compared to the previous month due to higher prices. They also hit a six-month-low, while imports of sunflower oil fell to a 10-month-low. ($1 = 4.2910 ringgit)

(source: Reuters)