JAKARTA: Malaysian palm oil futures eased almost 2 percent on Tuesday, weighed by weaker comparative vegetable oils and lower crude prices.
The benchmark June crude palm oil contract on Bursa Malaysia Derivatives traded down 1.4 percent at 3,368 Malaysian ringgit ($1,115) a tonne.
It earlier went as low as 3,355 ringgit.
Traded volume was at 12,813 lots of 25 tonnes each, versus Monday's total at 15,819 lots.
Traders added that further downside pressure will come from higher than expected stocks data reported during the previous session.
"Look at the export figures yesterday it is worrying," said one trader, "External factors are crude on the way down, and corn also down.
"Maybe this correction will take us to the brink of 3,300 and at that point, people should come back in again," he added.
"The only positive factor for palm oil, is the huge discount of Soybean oil."
On Monday, palm oil touched a peak at 3,454 ringgit a level not seen since March 21 despite moving into a higher output cycle.
"It could be near-term bearish for CPO price," Ivy Ng Lee Fang, an analyst at CIMB said in a note. "We predict that CPO inventory will rise another 5 percent to 1.7m tonnes in April due to higher output."
Other vegetable oil markets eased down on Tuesday however, with U.S. soyoil for May delivery slipping 0.3 percent.
U.S. wheat fell around 2 percent, while corn lost more than 1 percent.
The most-active Sept 2011 soyoil on the Dalian Commodity Exchange traded at 10,252 yuan versus an open at 10,282 yuan.
ICDX's June CPO futures contract was at 9,750 rupiah per kg, compared to 9,755 rupiah per kg when it opened. Market volume was 619 lots of 10 tonnes each.
Late on Monday, palm oil producer BW Plantation told Reuters in an interview, that production in top global producer Indonesia, would be weak this year.
Leading industry analyst Dorab Mistry said on Wednesday that palm oil could rise 11 percent to 4,000 ringgit per tonne in the next few weeks on higher energy prices, tight stocks and pent up demand for vegetable oils.
Reuter’s technical analysis showed palm oil is expected to rise 3,470 ringgit per tonne based on a Fibonacci retracement analysis.
In other markets, U.S. crude dropped by $2 a barrel and Brent crude fell sharply to below $122, extending overnight losses on concern high fuel prices will destroy demand and as Goldman Sachs advised investors to lock-in commodity trading profits.
Long-term commodity bull Goldman advised its clients to take profit as there is a strong chance that commodity prices may reverse.
Analysts say that every $10 per barrel change in the crude oil price could result in a 200 ringgit per tonne change in the crude palm oil price.
Although palm oil can be a feedstock for biodiesel, it is more likely to be used to fill the gaps left behind by soyoil and rapeseed oil that are increasingly used in the energy sector.
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