Palm oil falls

Malaysian palm oil futures fell for a second session on Friday as easing crude prices reined in biodiesel-driven demand for the tropical oil, and as weakness in comparative soyoil markets dragged. Benchmark prices shot up to a near one-month high of 2,511 ringgit earlier this week, as violence in Iraq sparked fears of supply disruptions from Opec's second-largest producer, in turn making palm a more attractive option for biodiesel feedstock.
This demand cooled off as crude prices eased later. Palm prices, however, recorded their third straight weekly gain with a 0.1 percent rise. "The palm market went up along with higher crude oil. When that came down, our market also followed," said a trader with a foreign commodities brokerage, adding that overnight losses in soy markets also weighed on palm prices. The benchmark September contract on the Bursa Malaysia Derivatives Exchange inched down 1 percent to 2,445 ringgit ($761) per tonne by Friday's close.
Total traded volume stood at 36,041 lots of 25 tonnes, higher than the average 35,000 lots. Brent crude was up 10 cents at $113.31 a barrel by 0930 GMT after falling 79 cents in the previous session, consolidating after one of its biggest weekly falls this year as investors unwound positions on reduced concerns over exports from strife-torn Iraq.
Palm oil prices could drop to between 2,300-2,500 ringgit per tonne over the next few weeks, missing an earlier forecast by about 13 percent given Indonesia's disappointing uptake of palm-based biodiesel, leading vegetable oil analyst Dorab Mistry said on Thursday.
Mistry said while demand would be robust at the lower end of this range, a rise to near 2,500 ringgit could curb interest and push up Malaysian palm stocks to a peak of 2.5 million tonnes by November. Stocks at end-May stood at 1.84 million tonnes. Another Kuala Lumpur-based commodities dealer said easing palm prices will likely provide a weaker tone for next week.
Some market players say the heat could be early signs of the drought-inducing El Nino weather pattern, which is slated to hit Southeast Asia later this year. In competing vegetable oil markets, the US soyoil contract fell 0.2 percent in late Asian trade, while the most active soybean oil contract on the Dalian Commodities Exchange shed 0.6 percent.