Palm oil hits six-month low on rising output forecast

KUALA LUMPUR: Malaysian palm oil futures hit their lowest in nearly six months on Monday on forecast of rising production, ahead of official output data released at the midday break.

Data from the Malaysian Palm Oil Board (MPOB) showed end-stocks for March rose 6.5 percent on-month to 1.55 million tonnes, outpacing market expectations, while exports rose 14.3 percent to 1.27 million tonnes.

The benchmark palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange was down 1.3 percent at 2,627 ringgit ($591.93) a tonne at the midday break. Earlier in the session, it hit 2,613 ringgit, its weakest level since Oct. 13.

Traded volumes stood at 27,411 lots of 25 tonnes each at noon.

"The rise in output is expected given March has more calendar days, compared with February. We are just waiting for MPOB's official numbers now," a futures trader from Kuala Lumpur had told Reuters before the data release.

The MPOB data also showed that output surged 16.3 percent to 1.46 million tonnes, its first monthly gain since September and its strongest on-month rise in over a year.

Concerns of rising output weighed on the market despite data indicating an improvement in demand. Palm oil shipments from Malaysia, the world's second-biggest producer of the tropical oil, soared 20.9 percent during the first 10 days of April as compared with last month, showed data from cargo surveyor Intertek Testing Services.

Palm oil looks neutral in a range of 2,638-2,665 ringgit per tonne, according to Wang Tao, a Reuters market analyst for commodities and energy technicals.

Price movements in related edible oils, including soyoil, have an impact on palm oil, as they compete for a share in the global vegetable oils market. Soybean oil on the Chicago Board of Trade dropped 0.4 percent.

In other related vegetable oils, the September soybean oil contract on the Dalian Commodity Exchange was up 0.1 percent, while the September contract for palm olein on the Dalian Commodity Exchange slid 1.7 percent.