Palm falls, snapping five-week rally, posts steepest weekly loss in 16 months

KUALA LUMPUR: Malaysian palm oil futures retreated more than 2% on Friday, snapping a five-week rally, as concerns that a rise in output could outstrip demand amid the ongoing Middle East war pressured prices, even as inventories fell to a seven-month low in March.

The benchmark palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange was down 108 ringgit, or 2.33%, at 4,535 ringgit ($1,144.05) a metric ton at the close.

The contract fell 6.28% this week, its biggest weekly decline in nearly 16 months.

Malaysia’s palm oil inventories slid in March, down for a third straight month and hitting a seven-month low on a surge in exports that more than offset a modest increase in output.

As we enter the peak production months of April, May, and June, demand destruction caused by the Middle East war and higher freight costs will begin to reflect in the April 1–10 export figures, said Paramalingam Supramaniam, director at brokerage Pelindung Bestari.

“If exports fail to keep pace with the seasonal increase in production, end stocks will inevitably rise again, capping any near-term recovery. Exports must remain robust but looking at the current environment, it is going to be difficult,” he added.

Cargo surveyors estimated that exports of Malaysian palm oil products for April 1-10 fell between 30.7% and 38.9% month-on-month.

Dalian’s most-active soyoil contract rose 0.4%, while its palm oil contract added 0.11%. Soyoil prices on the Chicago Board of Trade were down 0.87%.

Palm oil tracks the price movements of rival edible oils, as it competes for a share of the global vegetable oils market.

Oil prices climbed, driven by fresh anxiety over supplies from Saudi Arabia and as tanker traffic through the critical Strait of Hormuz remained largely frozen.

Stronger crude oil futures make palm a more attractive option for biodiesel feedstock.