Palm erase early gains as rival oils fall; lower supply outlook checks losses

KUALA LUMPUR: Malaysian palm oil futures reversed early gains and fell for a second straight session on Tuesday dragged by lower rival oils, but estimates of declining production in the coming months underpinned the market.

The benchmark palm oil contract for February delivery on the Bursa Malaysia Derivatives Exchange settled down 0.77pc to 3,366 ringgit ($827.03) a tonne.

Palm prices dipped in line with rival soyoil on the Chicago Board of Trade, which was down 1.3pc.

Estimates of lower December production and weather vagaries, along with much-anticipated lower output in the first quarter of 2021, are expected to support prices, said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.

Production in Southeast Asia has been hit by rainy weather brought on by the La Nina weather pattern, which is expected to last until the first quarter of next year.

On Monday, the Southern Palm Oil Millers Association estimated Malaysian production during Dec. 1-5 fell 4.2pc from the month before, traders said.

A Reuters survey last week showed production likely declined 10pc month-on-month to 1.55 million tonnes in November and stockpiles fell 2pc.

The Malaysian Palm Oil Board will release official production data on Dec. 10.

Palm oil imports into the European Union and Britain in the 2020/21 season that started on July 1 stood at 2.65 million tonnes, up 7pc from the previous season, official EU data showed on Monday.

Dalian's most-active soyoil contract fell 2.5pc, while its palm oil contract was down 2pc.

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