MUMBAI: Malaysian palm oil futures dropped on Thursday, weighed down by weakness in rival Chicago soyoil, a sharp drop in exports and a correction in crude oil prices.
The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange fell 72 ringgit, or 1.82%, to 3,876 ringgit ($811.22), after rising more than 1% on Wednesday.
Malaysia’s palm oil production is falling, but the drop in exports is even greater, which is pulling down prices, said a Kuala Lumpur-based dealer.
Exports of Malaysian palm oil products for February 1-15 fell by 10.8% to 17% from the previous month, two cargo surveyors reported on Thursday.
“Palm oil was under pressure because of weakness in rival oils, especially soyoil. Crude oil is also down,” said Mitesh Saiya, trading manager at Mumbai-based trading firm Kantilal Laxmichand & Co. “Besides, the palm oil’s premium over other oils is curtailing demand,” he said.
Soyoil prices on the Chicago Board of Trade were down 1.09%. Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
Malaysia’s palm oil stocks fell more than expected to their lowest in six months at the end of January as production plunged to the lowest level in nine months amid steady exports, the industry regulator said on Tuesday.
The rebound in palm oil prices is likely to be capped by abundant supplies of rival soyoil and sunflower oil, “soft” oils that are available at discounts to tropical palm oil for the first time in more than a year.
Oil prices fell on Thursday after data showed US crude inventories jumped much more than expected, raising concerns about demand in the world’s largest economy.
Weaker crude oil futures make palm a less attractive option for biodiesel feedstock. Palm oil may retrace towards a range of 3,916 ringgit to 3,925 ringgit per metric ton, as it faces a strong resistance zone of 3,964 ringgit to 3,967 ringgit, Reuters technical analyst Wang Tao said.
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