KUALA LUMPUR: Malaysian palm oil futures reversed early gains on Thursday to decline for a second consecutive session, pressured by weaker crude and rival soyoil, but tight supply sentiment put a floor below prices.
The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange closed down 6 ringgit, or 0.13%, at 4,689 ringgit ($1,123.11) a tonne.
Oil prices eased after the world's top importer China cut the first batch of crude import allocations for 2022, making palm a less attractive option as biodiesel feedstock.
Prices had risen last week due to expectations of a drawdown in inventories on the back of a double-digit decline in production and higher-than-expected exports, Anilkumar Bagani, research head at Mumbai-based vegetable oils broker Sunvin Group, said.
Palm climbs on firmer rival oils, supply shortages
"Analysts see palm oil bulls will likely hold sway into early 2022 as a chronic worker shortage in Malaysia and heavier than usual rains in key growing areas disrupt palm oil production," Bagani added.
Global palm oil production will remain constrained next year as farmers are expected to reduce fertiliser application due to soaring costs, the Council of Palm Oil Producing Countries (CPOPC) said in an outlook report.
Dalian's most-active soyoil contract rose 0.5%, while its palm oil contract gained 0.4%. Soyoil prices on the Chicago Board of Trade were down 0.9%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
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