Malaysian palm oil futures fell on Thursday, hitting a three-week low, due to weak export demand and a narrowing spread between the tropical oil and soyoil. The benchmark palm oil contract for March on the Bursa Malaysia Derivatives Exchange had dropped 1 percent to 2,423 ringgit ($551.94) per tonne at the end of the trading day. Traded volume stood at 48,921 lots of 25 tonnes each at the close of trade.
Palm has been on a downward trend since hitting an 18-month high on the last trading day of 2015. It dropped to 2,418 ringgit earlier this evening, its lowest point since December 18. It has lost 2.5 percent so far this year. "Sentiment is weak today, export demand from China is not picking up," said a trader based in East Malaysia, adding that a narrowing spread between palm and soyoil's forward month contract dampens demand for palm oil.
"This puts more pressure on crude palm oil prices." Exports from Malaysia, the world's number two producer of palm, have been falling as demand from top consumer China has been slowing on weaker domestic consumption. Malaysia's palm exports in December fell 5-6 percent from the previous month. Palm oil is biased to retest a support at 2,416 ringgit per tonne, a break below which could cause a loss to 2,394 ringgit, said Reuters market analyst for commodities Wang Tao. In competing vegetable oil markets, the US March soyoil contract fell 0.9 percent, while the May soybean oil contract on the Dalian Commodity Exchange lost 0.4 percent.