Palm drops after sharp climb as crude, weaker edible oils weigh

KUALA LUMPUR: Malaysian palm oil futures fell on Wednesday after a 5% climb in the previous session as weaker global edible oils and a drop in crude prices weighed on sentiment.

The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange slid 127 ringgit, or 2.85%, to 4,330 ringgit ($1,049.70) a tonne by the midday break, its sharpest intraday percentage fall in three weeks.

The contract had fallen as much as 3.4% during early trade. "Prices took a steep fall today, in unison with the negative close in Chicago Board of Trade," said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.

End-stocks are likely to be "extremely tight" in May due to higher exports and a lower pace of production, he said.

Soyoil prices on the Chicago Board of Trade were down 0.5%. Dalian's most-active soyoil contract fell 0.9%, while its palm oil contract declined 1%.

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

Oil prices fell for a second day on Wednesday, hit by renewed demand concerns as coronavirus cases in Asia surged and on fears that rising inflation might lead the US Federal Reserve to raise interest rates, which could limit economic growth.

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

Palm oil may break a support at 4,369 ringgit per tonne, and fall to 4,273 ringgit, Reuters technical analyst Wang Tao said.