Palm falls more than 1% as higher output pressure rises and demand lags

KUALA LUMPUR: Malaysian palm oil futures fell more than 1% on Thursday, as expectations of higher output pressured the market, while export demand has yet to show any meaningful recovery.

The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange fell 50 ringgit, or 1.1%, to 4,507 ringgit ($1,105.47) a metric ton at the close.

The market currently lacks bullish sentiment, as production continues to ramp up while exports remain anaemic and have yet to show signs of recovery, said Paramalingam Supramaniam, director at brokerage Pelindung Bestari.

“With production momentum building, it is a matter of time before selling pressure weighs further on the market. For now, prices will remain range-bound as participants await the Malaysian Palm Oil Board (MPOB) report.”

Supramaniam added that a build-up in stocks seems inevitable.

MPOB is expected to release its monthly demand and supply data on July 10.

Dalian’s most-active soyoil contract rose 0.21%, while its palm oil contract shed 0.97%. Soyoil prices on the Chicago Board of Trade were down 0.21%.

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

Oil prices fell for a third consecutive day as concerns over supply disruptions eased after Qatar said Iran and the U.S. had made progress in talks over the Strait of Hormuz.

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

The ringgit, palm’s currency of trade, strengthened 0.37% against the dollar, making the commodity slightly more expensive for buyers holding foreign currencies.

India’s palm oil imports in June fell to their lowest in 14 months as subdued demand and a narrowing discount to rival oils prompted buyers to cut purchases, five dealers said.