JAKARTA: Malaysian palm oil futures extended losses on Tuesday to hit their lowest levels since September, dragged down by concerns that Indonesia’s larger export quota would further hurt demand for Malaysian palm oil amid high inventories.
The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange fell 4.1% to close at 4,171 ringgit ($944.09) per tonne, after a 7.6% drop on Monday. It recorded its third straight session of losses.
An Indonesian official said on Tuesday the world’s top palm oil producer has increased export quota to lower domestic inventory and has as of Monday issued permits for a total of 2.4 million tonnes of palm oil products.
Rival Indonesia has now allowed palm oil producers to export seven times the amount it sold domestically from previously five times as local farmers faced price “emergency”.
Palm oil may stabilize around 4,588 ringgit
“This export numbers are bearish for the market,” a Kuala Lumpur-based trader said. “As of June, we can see demand slowed down a lot, any new orders most likely will go to Indonesia, thus further bring down our price.”
Malaysia’s palm oil inventories at end-June likely climbed to their highest levels in seven months, as exports plunged following top producer Indonesia’s return to the export market, a Reuters survey showed on Tuesday.
Weaker rival oils also soured sentiment. Both Dalian’s most-active soyoil contract and its palm oil contract slid by more than 5%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
The vegetable oil may retest a support at 4,267 ringgit per tonne, a break below which could open the way towards 3,900-4,090 ringgit range, Reuters technical analyst Wang Tao said.
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