Malaysian palm oil futures hit a near one-week low on Tuesday, as concerns about a higher production cycle, falling comparative oils and export numbers from the previous session weighed on prices. Benchmark July crude palm oil contract on Bursa Malaysia Derivatives Exchange closed at 3,330 Malaysian ringgit ($1,112) a tonne. Earlier, prices touched a low at 3,291 ringgit, a level not seen since April 20.
Trading volumes were 10,224 lots of 25 tonnes each, compared with a total at 8,027 lots on Monday. Palm oil - used in products such as food, cosmetics, tyres and biofuels - is about 1 percent lower this week. "On the cash side it is very quiet," said one trader. "The market is softer palm has been trading higher based on outside markets (like) Dalian, CBOT and crude.
"But looking at palm fundamentals, with low exports and higher production, it's not too good." On Monday, data showed that exports of Malaysian palm oil products for April 1-25 fell 7.7 percent to 865,593 tonnes from 937,591 tonnes shipped during March 1-25. ICDX's July CPO futures contract was at 9,660 rupiah per kg, compared with 9,640 rupiah per kg when it opened. Market volume was 1,666 lots of 10 tonnes each.
Most-active January 2012 soyoil on the Dalian Commodity Exchange traded at 10,256 yuan versus an open at 10,350 yuan. Offering some support late in the session, oil bounced from earlier losses on low trading volumes as some investors took advantage of the dip to buy, though gains were limited ahead of a closely watched US Federal Reserve policy meeting. Palm oil is less likely to be channeled into biofuels because of a lack of government subsidies, but mandates in Brazil and the United States may see more soyoil taken up, which leaves palm oil to lead the food sector.
"Crude oil prices will probably continue to go up because of strong Asian demand. As well as a biofuel drive in the US that will require more soyoil," said Ben Santoso, an analyst at DBS Vickers. "Supply and demand fundamentals should re-assert itself at the end of the year."
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