Malaysian palm oil futures fell on Thursday to reverse its morning session of gains as demand for the vegetable oil wanes on slowing exports. The palm oil contract for March on the Bursa Malaysia Derivatives Exchange lost 0.4 percent to 2,402 ringgit ($547.15) per tonne at the end of the trading day. Traded volume stood at 54,111 lots of 25 tonnes each.
Palm oil's direction has been uncertain in the recent trading sessions, as export demand for the tropical oil remains weak while it's expected that output might decline in the coming months due to the El Nino dry weather effect. "The market has mixed sentiments, as China is buying more soybeans from South America for both crushing and consumption and the hot weather with evening showers is helping production," said a trader from Kuala Lumpur.
"Yet production is slowing, plus (palm output could be lowered by) the El Nino effect. It is going to be very volatile. That's for sure," the trader added. The El Nino weather phenomenon brings dry weather across Southeast Asia, affecting the palm-producing countries of Malaysia and Indonesia. It impacts palm's fresh fruit yield and lowers output.
Traders are also anticipating the release of cargo surveyor data on Friday for the first 15 days of January as compared with the same time period a month ago as a gauge of palm's export demand. Palm oil prices saw a downward trend at the start of the year, falling from an 18-month high of 2,508 ringgit it had reached on December 31. The tropical oil has dropped 3.3 percent since the start of the year, dragged down by weak export demand, tumbling crude oil prices and volatile equity markets. The US March soyoil contract was down 0.2 percent, while the May soybean oil contract on the Dalian Commodity Exchange was 0.5 percent lower.
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