Palm oil slips on expectations of higher output amid weak China demand

• Palm oil exports from Indonesia are also falling due to lower demand by India and China, Bagani said.
• Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oil market.
• Palm oil may bounce to 2,711 ringgit per tonne, as it has stabilized around a support at 2,615 ringgit.

KUALA LUMPUR: Malaysian palm oil futures fell on Tuesday, as a forecast of higher output by an industry body against the backdrop of slowing demand from China due to the coronavirus epidemic hit prices.

The benchmark palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange was down 22 ringgit, or 0.83pc, at 2,627 ringgit ($633.32) by the midday break.

Feb. 1-15 production in the south of Malaysia is expected to increase by 42.52pc, traders said, citing data from the Malaysian Southern Peninsular Palm Oil Millers Association.

Meanwhile, the number of new infections in China fell below 2,000 on Tuesday for the first time since January, although global experts warn it is still too early to say the outbreak is being contained.

"The coronavirus outbreak in China is showing some signs of easing down but still things are not normal. The market is waiting for further confirmation that it is under control," said Anilkumar Bagani, research head of Sunvin Group, a Mumbai-based vegetable oil broker.

Palm oil futures lost 5.4pc last week on lower purchases from top buyers India and China. India, the world's top palm oil buyer, in January imposed restrictions on imports of refined palm oil from Malaysia, while the coronavirus outbreak in China has hurt demand for the commodity.

Malaysia palm oil exports between Feb. 1 and 15 dropped 6.7pc-10pc from a month before, according to cargo surveyors. This is a slight recovery compared with the 20pc-29.4pc drop over the Feb. 1-10 period.

Palm oil exports from Indonesia are also falling due to lower demand by India and China, Bagani said.

Indonesia, the world's biggest palm producer, has so far exported 84,000 tonnes of palm oil this month, compared with 371,000 tonnes for the full month of February last year, data from farming ministry officials showed on Monday.

Both Dalian's most-active soyoil contract and its palm oil contract traded 0.5pc lower. Soyoil prices on the Chicago Board of Trade were up 0.1pc.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oil market.

Palm oil may bounce to 2,711 ringgit per tonne, as it has stabilized around a support at 2,615 ringgit, Reuters technical analyst Wang Tao said.