Palm oil eases slightly on higher production outlook

KUALA LUMPUR: Malaysian palm oil futures dipped slightly at the midday break on Tuesday, in line for a second straight day of losses, weighed down by expectations of rising production.

Palm oil prices were on an uptrend at the start of the month tracking gains in rival oilseed soy, but saw a decline last week as production recovered.

The benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange was down 0.1 percent at 2,535 ringgit ($591.87) at the midday break.

Traded volumes stood at 10,671 lots of 25 tonnes each.

A futures trader from Kuala Lumpur said the market dipped today on expectations of an increase in production. "It looks like supplies are inching higher," he said. "The market is also factoring in weaker demand."

While output in June saw an unexpected decline due to lower harvests, as workers went on leave during the Muslim fasting month of Ramdan and the Eid-Al-Fitr holidays, production is seen rebounding in July.

Production in June fell 8.5 percent to 1.51 million tonnes from the previous month.

Muslim-majority Malaysia and Indonesia produce nearly 90 percent of the world's palm oil supplies.

In other related oils, the December soybean oil contract on the Chicago Board of Trade was up 0.6 percent, while the September soybean oil on the Dalian Commodity Exchange was up 0.2 percent.

The September palm olein contract however fell 0.4 percent.

The palm oil October contract may revisit its July 14 low of 2,519 ringgit per tonne, as its correction from the July 11 high of 2,585 ringgit seems to have extended, said Reuters market analyst for commodities and energy technicals Wang Tao.