Palm drops on high inventory, subdued related edible oils

KUALA LUMPUR: Malaysian palm oil futures declined in early trade on Thursday, after hitting their highest level in more than a week in the previous session, as ample supplies dented sentiment.

Other related edible oils were trading largely flat, with March soybean oil contract on the Chicago Board of Trade and May soybean oil on the Dalian Commodity Exchange edging up 0.1 percent each.

The Dalian January palm oil contract was up 0.4 percent.

Palm oil prices are also impacted by movements in other edible oils, as they compete for a share of the global vegetable oils market.

The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange fell 0.3 percent at 2,531 ringgit ($621.10) a tonne at the midday break.

It had risen to its highest level in over a week in the previous session, and is up 3.3 percent for the week.

Trading volumes were thin at 6,931 lots of 25 tonnes each at the midday break.

"Soyoil on China's Dalian Commodity Exchange and the Chicago Board of Trade are only slightly up, and year-end stocks are still very high," said a futures trader from Kuala Lumpur.

"Palm's prices can't go up very high ... though next month's production will be down."

Palm oil production is set for a decline until the first quarter of next year, in line with seasonal trend. It fell 3.3 percent to 1.94 million tonnes in November.

Prices of the tropical oil however have slumped since the start of November on the back of rising inventory levels and weak demand. Exports from Malaysia fell 11.9 percent to 1.35 million tonnes in November, but has improved so far in December.

Demand rose about 1 percent during Dec. 1-25 versus a month earlier, data released by cargo surveyors Intertek Testing Services (ITS) and Societe Generale de Surveillance (SGS) showed on Tuesday.