Palm falls to two-week low on weak export demand

KUALA LUMPUR: Malaysian palm oil futures closed at their lowest level in two weeks on Tuesday,reversing gains in the previous session, as sluggish export demand continued to weigh on the market.

The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange was down 48 ringgit, or 1.05%, at 4,527 ringgit ($1,115.57) a metric ton, the lowest closing price since May 26.

The market remains on edge, caught between weak demand and subtle signs of recovery in June production, said Paramalingam Supramaniam, director at brokerage Pelindung Bestari.

“A weaker ringgit, while offering some relief, cannot serve as a sustained shock absorber over the long term as genuine demand must materialise before the market enters its peak production months in the third quarter,” he added.

The ringgit, palm’s currency of trade, strengthened 0.29% against the dollar on Tuesday after weakening to its lowest level since January 13 in the previous session.

Cargo surveyors estimated that exports of Malaysian palm oil products for May fell between 8.8% and 15.5% from a month earlier. The Malaysian Palm Oil Board is expected to release its monthly supply and demand data on Wednesday.

Dalian’s most-active soyoil contract fell 0.85%, while its palm oil contract shed 1.3%. Soyoil prices on the Chicago Board of Trade were down 0.27%.

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

Oil prices also fell, erasing most of the previous session’s gains, after Iran and Israel said they had halted attacks on each other following an appeal from U.S. President Donald Trump, though both sides warned they could resume hostilities.

Weaker crude oil futures make palm a less attractive option for biodiesel feedstock.