Palm clocks 11pc weekly fall on higher output hopes, lockdown fears

KUALA LUMPUR: Malaysian palm oil futures fell on Friday and logged an 11% weekly drop, its sharpest in a year, hit by weakening demand and lockdown concerns and estimates of higher production.

The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange closed down 119 ringgit, or 2.89%, at 3,993 ringgit ($964.73) a tonne.

Palm fell for a third straight session to its lowest since May 4.

The market is trading on estimates of higher production levels for June as well as July to September, said Marcello Cultrera, institutional sales manager & broker at Phillip Futures in Kuala Lumpur.

"The third-quarter production average seems likely at 1.8-1.85 million tonnes and the fourth quarter average at 1.7-1.75 million tonnes," he said.

Malaysia's palm exports during May 1-20 rose 4.6% month-on-month, slowing down from a 22% monthly rise in exports during May 1-15, as key buyer Europe reduced purchases, according to data from Societe Generale de Surveillance.

There are also concerns of stricter movement restrictions in Malaysia, which could implode consumption from the domestic hospitality, restaurants and catering sectors, Cultrera said.

The world's second-largest palm oil producer reported 6,493 new coronavirus cases on Friday amid local reports that the government was discussing a full lockdown to curb the outbreak.

Dalian's most-active soyoil contract fell 3%, while its palm oil contract was down 4%. Soyoil prices on the Chicago Board of Trade slid 1%.

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