KUALA LUMPUR: Malaysian palm oil futures tumbled more than 2percent on Friday to their lowest level in over seven weeks, pressured by expectations of higher output and weak exports that could boost inventories.
The benchmark palm oil contract for December delivery on the Bursa Malaysia Derivatives Exchange slid 99 ringgit, or 2.07percent, to 4,673 ringgit (USD1,148.16) a metric ton, the lowest closing since August 3.
The contract fell 4.59percent this week after rising 1.74percent in the previous week. Crude palm oil futures remained bearish despite India’s import duty cuts on edible vegetable oils, said Anilkumar Bagani, research head at Mumbai-based vegetable oil broker Sunvin Group. Higher-than-expected palm oil production and weak exports have raised concerns that Malaysian stocks could exceed 3.1 million tons by the end of September, Bagani added.
The Indian government on Wednesday cut its basic import duty on crude and refined edible oils, including palm oil, soyoil and sunflower oil, as it seeks to lower prices during the peak festive season.
Palm oil prices are poised to remain under pressure as rising inventories in Malaysia and sluggish buying by India, the world’s biggest importer, weigh on the market, and the impact of El Niño has yet to be felt, industry officials said.
Oil prices fell as markets weighed the possibility of a truce between the US and Iran against concerns that increasing attacks against Saudi Arabia by Houthi fighters could disrupt supply from the key Middle Eastern producer.
Weaker crude oil futures make palm a less attractive option for biodiesel feedstock. Soyoil prices on the Chicago Board of Trade fell 1.13percent, while the Dalian Commodity Exchange was closed for a public holiday.
Palm oil tracks the price movements of rival edible oils, as it competes for a share of the global vegetable oils market. The ringgit, palm’s currency of trade, strengthened 0.34percent against the dollar, making the commodity slightly more expensive for buyers holding foreign currencies.
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