KUALA LUMPUR: Malaysian palm oil futures sank nearly 8% on Friday, as red-hot prices triggered profit-taking, but the market was still up for a second straight week with surveys showing a plunge in end-February inventories.
Prices rose 5.2% for the week on fears of a prolonged disruption in sunflower oil supply from the Black Sea region following Russia’s invasion of Ukraine and likely tightening palm oil supply.
The benchmark palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange fell 534 ringgit, or 7.84%, to 6,274 ringgit ($1,502.39) a tonne, its worst daily decline since mid-June last year.
“After the current rally, premised on short covering, finally prices are trying to find a bottom that would eventually generate better buying interest,” said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.
“The fundamentals remain attractive with lower end-stocks and tighter edible oil availability worldwide,” he added.
Malaysia’s palm oil stockpile at end-Feb likely plunged 11.4% from the month before to a more than 10-month low of 1.38 million tonnes, a Reuters survey showed on Friday.
Output is seen falling 5% to 1.19 million tonnes, while exports are expected to rise 8% to 1.25 million tonnes.
However, the world’s biggest palm oil buyers, China and India, have slowed imports as prices have risen to record highs, even as the Russia-Ukraine crisis has squeezed global edible oil supply, industry officials said in a UOB Kay Hian conference on Thursday.
Short-term supply squeeze will sustain the market, but prices could weaken once the export backlog eases in Indonesia and more vegoil supply comes onstream in the second half of the year, UOB Kay Hian said in a note.
In related oils, soyoil prices on the Chicago Board of Trade were down 3%. Dalian’s most-active soyoil contract fell 3.3%, while its palm oil contract eased 5%.
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