KUALA LUMPUR: Malaysian palm oil futures tumbled more than 1percent on Friday as industry data showed that stocks climbed to a four-month high in June, with a recovery in production outpacing demand.
The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange was down 83 ringgit, or 1.81 percent, at 4,511 ringgit (USD1,109.17) a metric ton by the close.
The contract has risen 0.69percent this week, logging its first weekly gain in three. With the Malaysian Palm Oil Board data showing stockpiles at these levels, traders are anticipating weaker demand absorption, resulting in downward pressure on prices, said Paramalingam Supramaniam, director at brokerage Pelindung Bestari. Prices were also pressured by weakness in rival oils, with Dalian’s most-active soyoil contract down 0.93percent and its palm oil contract down 1.76 percent. Soyoil prices on the Chicago Board of Trade edged 0.2percent lower.
Palm oil tracks the price movements of rival edible oils, as it competes for a share of the global vegetable oils market. Oil prices eased but remained on track for weekly gains as renewed US-Iran fighting disrupted shipping in the Strait of Hormuz, stoking concerns over supply disruptions. Weaker crude oil futures make palm a less attractive option for biodiesel feedstock.
Meanwhile, cargo surveyors estimated that exportsof Malaysian palm oil products for July 1-10 rose between 1.6 percent and 5.1percent from a month earlier.
Separately, Indonesia’s mandate to raise the biodiesel blend to 50percent palm-oil-based fuel from 40percent will increase crude palm oil usage to between 16.3 million and 17 million metric tons from 15.2 million tons, Energy Minister Bahlil Lahadalia said.
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