KUALA LUMPUR: Malaysian palm oil futures dropped as much as 5.7% on Tuesday, extending losses to a fourth session, hampered by weaker crude prices and as surging COVID-19 cases in key buyer China raised worries about demand.
The benchmark palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange closed 3.66% down at 6,128 ringgit ($1,457.31) a tonne.
Palm prices are under pressure with speculative selling at current levels and negative sentiment in both Chicago and Dalian, said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.
Palm plummets nearly 10% as rival Dalian oils, crude weaken
Exports in March are better-than-expected, and production is almost above 25% for the first 10 days of March, said Supramaniam. “This added with speculative selling will certainly pressure prices in the 2Q of 2022.”
Exports of Malaysian palm oil products for March 1-15 rose 15.6% to 585,277 tonnes from the same period in February, cargo surveyor Intertek Testing Services said.
Investors were also closely watching for export tax and policy changes in Indonesia after the world’s top producer expanded a rule requiring companies to sell 30% of their planned exports domestically.
China reported a steep jump in daily COVID-19 infections on Tuesday, with new cases more than doubling from a day earlier to a two-year high as a virus outbreak expanded rapidly in the country’s northeast.
Dalian’s most-active soyoil contract fell 1.9%, while its palm oil contract was down 5.2%. Soyoil prices on the Chicago Board of Trade declined 1.7%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
Oil prices extended losses, sliding to a two-week low as ceasefire talks between Russia and Ukraine eased fears of further supply disruptions and surging COVID-19 cases in China fuelled concerns about slower demand.
Weaker crude makes palm a less attractive option for biodiesel feedstock.
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