Palm falls as US court ruling stokes demand worries for rival soyoil

KUALA LUMPUR: Malaysian palm oil futures slipped on Monday, tracking a sharp drop in rival Chicago soyoil on Friday after a US Supreme Court ruling on biofuel blending stoked demand concerns.

The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange slid 36 ringgit, or 1.02%, to 3,484 ringgit ($839.52) a tonne by the midday break.

Earlier in the day, palm dropped as much as 2.8% in its biggest intraday drop in nearly two weeks. Palm rose 2.8% last week, marking its first weekly gain in three.

With the help of bullish Chicago soyoil futures, palm prices had been rising despite expectations of rising output, but that support has been easing, said Anilkumar Bagani, research head of Mumbai-based vegetable oils broker Sunvin Group.

The contract could face more pressure unless a significant demand recovery is seen from key markets India, the European Union and China, which are currently not making any meaningful purchases, Bagani said.

Further weighing on palm prices, state news agency Bernama reported Malaysia would extend a national lockdown beyond Monday to curb the spread of COVID-19, which may hit consumption of the edible oil.

Last week, the US Supreme Court made it easier for small oil refineries to win exemptions from laws requiring them to blend increasing levels of ethanol or other biofuels into their products - a major setback for biofuel producers.

Soyoil prices on the Chicago Board of Trade were up 0.7%, after dropping 4.8% in the previous session. Dalian's most-active soyoil contract gained 0.4%, while its palm oil contract rose 1.2%.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

Palm oil may fall to 3,351 ringgit as it faces a resistance at 3,506 ringgit per tonne, Reuters technical analyst Wang Tao said.