JAKARTA: Malaysian palm oil prices dropped 2.83% on Wednesday, reversing an over 7% gain in the past three sessions, as a price rally dampened demand from top buyers India and China.
The benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange fell 2.83% to 4,297 ringgit ($1,015.12) when market closed on Wednesday.
"Prices came off on heavy selling nearby as prices shot up fast over the last week. India and China slowed down purchase since last Thursday as price moved up quickly," a Kuala Lumpur-based trader told Reuters.
Fundamentally, Malaysian palm prices "should be strong" due to supply disruption concerns amid rising COVID-19 cases, another trader said, but Malaysia also faces competition from rival Indonesia.
"Indian demand doesn't reflect in our export. As a matter of fact, India is buying from Indonesia due to the discount," a second Kuala Lumpur-based trader said.
Indonesia has set the crude palm oil reference price lower in August, at $1,048.62 per tonne, lowering export taxes to $93 per tonne, while export levies for crude palm oil remain unchanged at $175 per tonne.
In related oils, Dalian's most-active soyoil contract fell 1.69% and its palm oil contract was down 1.04%. Meanwhile, soyoil prices on the Chicago Board of Trade slipped 0.65%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market. ($1 = 4.2330 ringgit).