Malaysian palm oil futures fell on Wednesday for the first time in five sessions, dropping from a two-year high in the previous session, as the market corrected on a stronger ringgit and declines in competing vegetable oils traded in overseas markets. The palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange fell 0.4 percent to 2,700 ringgit ($676) per tonne at the end of the trading day.
Traded volumes were 45,064 lots of 25 tonnes each on Wednesday, compared with a 2015 daily average of 44,600 lots. "This is a long overdue correction," said a Kuala Lumpur-based trader. "Further strengthening in the ringgit and the overseas retreat could have triggered the correction from the technically overbought market." The ringgit, the currency palm oil is traded in, broke through a key psychological level of 4.000 per dollar to strengthen to 3.9930 on Wednesday evening. A stronger ringgit makes palm oil more expensive for those paying in foreign currency.
Palm oil has risen in the four previous sessions and has gained about 2 percent since the start of the week. It hit 2,726 ringgit in intra-day trading on Tuesday, the strongest level since March 2014. Prices have been lifted by concerns that a crop-damaging El Nino will reduce output and tighten supplies. Palm oil may retreat to 2,645 ringgit per tonne, as it has now pierced a support level of 2,695 ringgit, said Wang Tao, a Reuters market analyst for commodities and energy technicals.
In competing vegetable oil markets, the September soybean oil contract on the Dalian Commodity Exchange and the May Chicago Board of Trade soyoil contract fell 0.9 percent and 0.7 percent respectively. Crude palm kernel oil's offer price stood at 5,241.47 ringgit per tonne at the close of trade on Wednesday, its first drop since March 2, according to assessment prices by Thomson Reuters.
Comments
Comments are closed for this article.