KUALA LUMPUR: Malaysian palm oil futures fell to a one-month low on Monday, on concerns demand from China may slow after the government moved to drain cash from the economy and rein in inflation.
Palm oil followed last Friday's declines in the US soy complex when China raised its required reserves for big banks to record levels.
Weaker Malaysian exports worsened the declines but shipments to China doubled in Feb. 1-25, signalling some restocking demand after Lunar New Year holidays earlier this month.
"Currently, Malaysia's palm oil market is still lagging but it was moving in tandem with weak overseas markets," said a trader in Kuala Lumpur.
The benchmark May crude palm oil contract fell 0.7 percent to 3,656 ringgit ($1,205.010) per tonne after touching its lowest level since January 18 at 3,621 ringgit.
Overall traded volume more than tripled to 25,633 lots of 25 tonnes each from the usual 15,000 lots.
A Reuters technical analysis showed Malaysian palm oil price will decline further to 3,570 ringgit per tonne, based on its wave pattern and a triangle pattern.
Although cargo surveyor Intertek Testing Services said exports of Malaysian palm oil products for Feb. 1-20 fell 3.2 percent to 825,180 tonnes from the same period a month ago, demand from China limited the declines.
Another cargo surveyor, Societe Generale de Surveillance, showed a 1.5 percent rise in overseas demand over the same period.
Indonesian Palm Oil Board (IPOB) said on Friday its palm oil production is estimated to rise by 7-9 percent this year, while global consumption is likely to increase 5 percent annually over the next five years.
Higher production comes as Indonesia develops its commodity processing sector that will lure more firms to invest in palm oil products.
Trading in the Asian vegetable oil complex was slow, as US commodity markets were shut for a public holiday on Monday.
The most active September soyoil contract on China's Dalian Commodity Exchange dropped more than 1 percent on Beijing's inflation move and speculation over a possible move to cut a range of import tariffs, although the proposal was later rejected.
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