Palm falls on higher output forecast, set to snap 4 weekly gains

KUALA LUMPUR: Malaysian palm oil futures fell on Friday, on track to snap four consecutive weekly gains, due to forecast of a higher production in June, with weaker prices of crude and rival oils also denting sentiment.

The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange slid 21 ringgit, or 0.89pc, to 2,345 ringgit a tonne by the midday break. For the week so far, it is down 0.13pc.

The Southern Peninsular Palm Oil Millers Association estimated June 1-10 production in some parts of Malaysia rose 31.7pc from the previous month, traders said.

Weighing on the market further were oil prices that fell after a threat of a second wave of infections in the United States raised worries about demand at the world's biggest consumer of crude and fuel.

Weaker crude oil futures make palm a less attractive option for biodiesel feedstock.

Dalian's most-active soyoil contract fell 0.95pc, while its palm oil contract slipped 1.52pc.

Soyoil prices on the Chicago Board of Trade were also trading down 0.33pc.

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

Malaysia will export more palm oil to India, China and the European Union, the biggest buyers, in the third quarter after an easing of coronavirus curbs and an export duty exemption, the Malaysian Palm Oil Council said on Thursday.

"Crude palm oil price is likely to be supported on the back of optimism on stronger sales of palm oil to India in the coming months. However, the boost in demand may be short-lived if there is a second wave of COVID-19," said Ivy Ng, regional head of plantations research at CIMB Investment Bank, said in a note.

Palm oil may fall to 2,265 ringgit per tonne, as it has cleared a support at 2,342 ringgit, said Reuters technical analyst Wang Tao.