KUALA LUMPUR: Malaysian palm oil futures closed lower on Thursday after a sharp rise in the previous session, but a smaller-than-expected increase in end-July inventories and rising August exports cushioned the decline.
The benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange slid 44 ringgit, or 1.17%, to 3,727 ringgit ($815.54) per metric ton by the midday break.
The contract was trading near a six-week low hit on Tuesday.
Malaysia’s end-July palm oil inventories expanded 0.68% from the month before to a five-month high of 1.73 million metric tons, according to Malaysian Palm Oil Board (MPOB) data.
However, inventories were below market expectations as exports surged at a faster pace.
Production jumped 11.21% to 1.61 million tons, its highest since January, MPOB data showed. Exports rose 15.55% to 1.35 million tons, much higher than anticipated.
Palm ends two-day slump ahead of MPOB data
“Overall, the market looks set for a strong rebound from the recent lows,” said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.
Exports of Malaysian palm oil products for August 1-10 rose 5.9% from the same week in July, according to cargo surveyor Intertek Testing Services.
Another cargo surveyor, AmSpec Agri Malaysia, said exports jumped 17.5%.
Demand for palm oil has been increasing as its discount to soyoil and sunoil has grown, driven by the recent price rise in rival oils due to production concerns in the U.S. and supply disruptions from the Black Sea region, industry officials said.
Dalian’s most-active soyoil contract gained 2%, while its palm oil contract rose 1.3%. Soyoil prices on the Chicago Board of Trade were down 0.3%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
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