KUALA LUMPUR: Malaysian crude palm oil futures fell on Friday as traders booked profits from a rally driven by surging crude oil prices and prospects of tighter soyoil supplies from South America.
Prices rose more than six percent in February alone and have come under pressure this week from concerns of orders shifting to Indonesia that offers more discounts due to ample feedstock and lower export taxes for refined palm oil.
Cargo surveyors have reported up to a 10.5 percent drop in February exports from a month ago even though demand from China and India has been resilient.
"In general, demand is strong because people will buy more palm oil than soyoil due to the South American drought but Malaysia may not be capturing demand because of Indonesia," said a trader with a foreign commodities brokerage in Kuala Lumpur.
Benchmark May palm oil futures on the Bursa Malaysia Derivatives Exchange dropped 0.8 percent to close at 3,259 ringgit ($1,085) per tonne. Traded volumes were thin at 16,601 lots of 25 tonnes each, compared to the usual 25,000 lots.
Technicals appeared to be positive as Reuters analyst Wang Tao said a Fibonacci projection analysis showed palm oil prices will rise to 3,342 ringgit per tonne.
Market players expect some shortcovering ahead of the Bursa Malaysia Palm Oil Conference next week where analysts are expected to present bullish views on vegetable oil markets.
A Reuters survey of Chinese and Singaporean traders showed China's palm oil stocks probably rose to nearly a million tonnes in February with a further build-up seen as traders keep buying cargoes on concern over strengthening prices.
Brent crude futures slipped below $126 on Friday after surging 5 percent to an 11-month high a day earlier, as fears of a supply disruption from Saudi Arabia eased, calming nervous investors who now expect oil demand to fall in the next few weeks.
In other vegetable oil markets, the US soyoil contract for March delivery and the most active September 2012 soyoil contract on China's Dalian Commodity exchange were both flat.
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