Malaysian palm oil futures fell to a three-week low on Thursday on concerns that demand could take a hit from a European Union move towards banning the use of palm oil in biofuels. The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange was down 0.4 percent at 2,476 ringgit ($626.20) a tonne at the end of the trading day, its third consecutive day of declines.
Earlier in the session, it touched 2,462 ringgit, its weakest since Dec. 26. Trading volumes stood at 48,741 lots of 25 tonnes each at the close of trade.
Traders said prices fell initially after a move by European lawmakers to approve a plan to ban the use of palm oil in motor fuels from 2021. "There are (also) concerns over high stocks and the lack of demand. There is no bullish news in the market," said one trader.
Malaysia and Indonesia on Thursday criticised the European Parliament for backing a ban on the use of palm oil in biofuels, calling the move a protectionist trade barrier and a form of "crop apartheid". A large portion of European palm oil imports are used to make biofuels, giving the palm industry a cause for concern as they fear a decline in overall demand.
Palm oil shipments in the first half of January already showed falling demand, according to cargo surveyor data. Intertek Testing Services showed a 7.4 percent decline during Jan. 1-15 versus the previous month, while Societe Generale de Surveillance reported a 2.8 percent decline for the same time period. Rising production forecasts for 2018 in Malaysia and Indonesia by leading vegetable oils analyst James Fry also weighed on the market, said another trader.
In other related edible oils, the March soyabean oil contract on the Chicago Board of Trade rose as much as 0.2 percent, while the May soyabean oil on the Dalian Commodity Exchange slipped 0.03 percent. The Dalian May palm oil contract was up 0.2 percent.
Palm oil tracks the performance of other edible oils, as they compete for a share in the global vegetable oils market.
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