KUALA LUMPUR/JAKARTA: Malaysian palm oil dropped to a seven-month low on Friday as expectations that a higher output cycle will lift stocks offset broad gains in agriculture markets.
Palm oil is on course for a drop of more than 8 percent in June, its worst monthly performance since February on sluggish commodity markets as well as high stocks outpacing export demand.
"We are looking for better export data next week to give some support but it will not be much," said a trader with a foreign commodities brokerage.
"However, the market has factored in all these bearish factors and has fallen 300 ringgit over the past two weeks. There should be some retracement."
The benchmark September crude palm oil contract on the Bursa Malaysia Derivatives Exchange ended 0.6 percent lower at 3,117 Malaysian ringgit ($1,028) a tonne after going as low as 3,103 ringgit -- matching a level last hit on Nov. 23.
September contact traded volumes stood at 17,790 lots of 25 tonnes each, versus 13,659 lots on Thursday.
Palm oil production is likely to easily push Malaysian stocks to 2 million tonnes this month, traders say.
"For stock levels, we all know it will be high, especially in the second half," said an Indonesian analyst. "Prices will go down again in the second half."
He added that policy changes to biodiesel subsidies in the US are also weighing on palm oil prices.
Indonesia raising its export tax for next month has spurred some palm oil firms to rush out their cargoes before the end of June to Malaysia, potentially swelling stocks, refiners say.
Falling prices could lure in buyers from Muslim countries from Pakistan to Iran who are looking to stock up ahead of the Ramadan fasting observance in August.
Exports have been reflecting this trend but may not be enough to slow Malaysia's stock growth. Cargo surveyors will report June 1-25 palm oil exports from Malaysia over the weekend and on Monday.
A deep sell-off in oil paused on Friday as the impact of a surprise announcement of an emergency stocks release faded.
Firmer crude oil lifted some vegetable oil markets that were also getting support following Greece's deal with international lenders for a new austerity plan.
US soyoil for July delivery climbed in Asian trade, while the most active January 2012 soybean oil contract on the Dalian Commodity Exchange eased.
Copyright Reuters, 2011
Comments
Comments are closed for this article.