Palm hits over 5-week low on rising stock expectations, subdued demand

KUALA LUMPUR: Malaysian palm oil futures reversed gains to hit a more than 5-week low on Tuesday, pressured by expectations of rising stock and subdued demand as traders awaited the upcoming meeting between the presidents of the US and China.

The benchmark palm oil contract for December delivery on the Bursa Malaysia Derivatives Exchange fell 47 ringgit, or 0.97%, to 4,810 ringgit ($1,180.66) a metric ton, the lowest closing since August 14.

US President Donald Trump and Chinese President Xi Jinping’s meeting this week is providing support to the broader agricultural complex, particularly soyoil, said Sandeep Singh, director of Kuala Lumpur-based consulting and trading firm The Farm Trade.

El Nino-linked risks will remain a major concern through the middle of next year, he added.

“However, Malaysia’s ending stocks are expected to exceed 3 million tons and could potentially approach record highs,” he said, adding that demand remained subdued and spot availability continued to weigh on prices.

Dalian’s most-active soyoil contract rose 0.54%, while its palm oil contract shed 0.49%. Soyoil prices on the Chicago Board of Trade declined 1.32%.

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

Cargo surveyors estimated that exports of Malaysian palm oil products for September 1 to 20 fell between 12.8% and 24.7% from a month earlier.

Oil prices fell after reports that Iran said it could reopen the Strait of Hormuz within seven days if the US takes initial steps to ease military pressure, easing concerns over disruptions to a key global oil shipping route.

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

Crude palm oil prices are expected to remain above $1,154 per metric ton in October and through the rest of the year, underpinned by weather uncertainties and favourable energy markets, the Malaysian Palm Oil Council said.