Malaysian palm oil futures snapped a three-day winning streak on Thursday, tracking a second major sell-off in commodities, although investors said the demand outlook was improving. The benchmark July crude palm oil contract on Bursa Malaysia Derivatives closed down 1.3 percent at 3,226 Malaysian ringgit ($1,082) per tonne. It earlier hit a low at 3,217.
Overall traded volume was at 13,513 lots of 25 tonnes each, compared to 12,155 lots on Wednesday. "We are following other commodities but at the same time, the near-term technical outlook is pointing down," said one dealer. "We expect demand to improve but I'm sure they don't mind buying at lower prices. Palm oil has lost almost 15 percent so far this year, down from a peak at 3,967 ringgit in February, on rising stocks and still weak demand. It fell to a six-month low last week along with a broad sell-off in commodities as traders initially fretted over the state of the US economy and cut risk taking.
"If you look at the supply and demand balance due to weather patterns - supply is still a little bit tight," said Chris de Lavigne, palm oil analyst at Frost & Sullivan. "Prices have come off their highs (but) probably not to the same extent as metals and oils. If the rest of commodities drift lower, it will eventually drag us down a little bit. Late on Wednesday, the US Department of Agriculture May supply and demand report showed that farmers around the world will harvest sharply larger grain crops this year, adding that a drop in US exports would also help replenish dangerously thin grain stockpiles.
The most active January 2012 soyoil on China's Dalian Commodity Exchange fell about 1 percent. "Soyoil prices will be pressured further with higher imports from Argentina," said an oil analyst in China's major soybean planting province of Heilongjiang. ICDX's July CPO futures contract was at 9,515 rupiah per kg, compared to 9,370 rupiah per kg when it opened. Market volume was 641 lots of 10 tonnes each.
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