Palm hits 16-month low on low demand, high stockpiles

KUALA LUMPUR: Malaysian palm oil futures hit a 16-month low on Thursday, weighed down by low demand and high stockpiles, while weakness in edible oils on China's Dalian Commodity Exchange also weighed on sentiment.

The benchmark palm oil contract for February delivery on the Bursa Malaysia Derivatives Exchange dropped as much as 1.4 percent to its lowest since Aug. 8, 2016 at 2,424 ringgit ($594.70), before settling down 0.9 percent at 2,436 ringgit a tonne at the midday break.

Palm oil has been on a downward trend recently, shedding 6.4 percent so far this month after declining 7.5 percent in November. It has dropped 1.7 percent so far this week in what could be its seventh straight weekly fall.

Trading volumes stood at 23,763 lots of 25 tonnes each at the midday break on Thursday.

"Dalian is down a lot. As palm is weighed down by bumper stocks and slow demand, we drop with a bit of weakness externally," said a Kuala Lumpur-based trader, referring to related edible oils on the Dalian Commodity Exchange.

Palm oil prices are affected by other edible oils as they compete for a share in the global vegetable oils market.

The January soybean oil contract on the Dalian Commodity Exchange was down 1.4 percent, while the Dalian January palm olein contract dropped 1.6 percent.

In Malaysia, stocks at the end of November increased to 2.56 million tonnes, the highest since late 2015, while data from cargo surveyors showed exports in the first 10 days of December fell 16-22 percent from a month earlier.

Palm oil demand usually weakens at year-end as it solidifies in cold temperatures, leading buyers such as China and Europe in the northern hemisphere to reduce purchases.

In other related oils, the January soybean oil contract on the Chicago Board of Trade fell 0.4 percent.