SINGAPORE: Malaysian palm oil futures dropped to their lowest in two weeks on Thursday as weak global economic sentiment weighed, with an unsuccessful German bond sale adding to worries that the Europe debt crisis was deepening.
The Germany's bond sale had one of the worst results since the launch of the euro, sending ripples across global markets from stocks to commodities. Palm oil this year has 18 percent so far.
"Dow Jones lost about 200 points yesterday and Dalian, CBOT were down too. All the external factors are pushing palm futures down," said a trader with a foreign commodities brokerage in Kuala Lumpur.
By the midday break, benchmark February palm oil futures on the Bursa Malaysia Derivatives Exchange dropped 2.0 percent to 3,097 ringgit ($970) per tonne. Prices fell as low as 3,092 ringgit, a level last seen on Nov. 10.
Overall traded volumes stood at 21,467 lots of 25 tonnes each, much higher than the usual 12,500 lots as more market players came into to sell down their positions.
Technicals remained bearish with Reuters analyst Wang Tao expecting palm oil to extend its losses to 3,050 ringgit per tonne, as indicated by a head-amd-shoulders pattern and a Fibonacci retracement analysis.
The Malaysian Meteorological Department issued orange stage warning that heavy rains could persist till Friday and trigger floods in parts of Pahang -- key oil palm growing area that accounts for 15 percent of production.
Palm oil could turn more bullish as heavy rains tend to reduce harvesting rounds in oil palm estates and floods will complicate the transport of the edible oil to mills and refineries.
The market is bracing for low production in the last quarter due to a seasonal decline in yields and La Nina driven floods triggering floods during the monsoon season.
Buyers in India and Pakistan may rush in to snap up palm oil cargoes before any new price upswing makes the tropical oil expense as they restock after major festivals.
Traders are looking at Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance releasing Malaysian export data for Nov. 1-25 on Friday that could confirm this.
Going against the downtrend in most markets, Brent crude rose above $107 on Thursday as potential strong winter fuel demand and turmoil in the Middle East offset fears that a global economic slowdown could hurt consumption.
But the global economic gloom weighed on other vegetable oil markets. China's most active May 2012 soybean oil contract dropped 2.3 percent. US soyoil markets were closed for a public holiday on Thursday.
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