SINGAPORE: Malaysian palm oil futures ended lower on Thursday, following the Lunar New Year break, but selling pressure was limited due to Indonesia's new mandate for 20% of domestic output to be sold at home.
The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange closed 1.23% down at 5,523 ringgit ($1,314.68) per tonne.
The contract hit a record high of 5,700 ringgit a tonne at the end of January, and price support is expected to remain steady as market participants assess the impact of a new sales mandate from the world's largest palm oil producer and exporter.
Along with enduring output issues in Malaysia due to labour shortages on plantations, the Indonesia export curbs have helped palm oil prices outperform rival oils in the past six months, upending global vegetable oil markets.
Top palm oil importer India has already stepped up purchases of rival oils such as soy and sunflower oil as palm prices pushed to new highs, and more substitution looks likely if they continue to outperform alternatives in global markets.
Strong global soybean prices amid crop health worries in South America are also expected to lend support to edible oil prices. Chicago soy oil futures eased around 1% in line with palm oil to around 65.35 cents a pound.
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With China's markets closed all week for the Lunar year celebrations, overall trading volumes during Asian hours have been light this week, but are expected to pick up once Chinese traders resume work next week.
"We've been in a bit of a holding pattern while China has been away, but activity should pick up next week," said a Singapore-based oilseed trader.
"We're also waiting to get a handle on what's going on with Ukraine, and if we should expect sun exports to get affected," he added, referring to the tense standoff between Russia and members of NATO over Ukraine.
Ukraine is the top sunflowerseed oil producer and exporter.
From a technical analysis perspective, palm oil may fall towards 5,484 ringgit, having failed to break resistance at 5,676 ringgit per tonne during the latest phase, according to Reuters technical analyst Wang Tao.
Several key Asian markets are closed for the Lunar New Year holiday.
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