SINGAPORE: Malaysian palm oil prices dropped to their lowest level in a week on Friday as investors worried about demand from China after weak manufacturing data and Spain's shaky finances, the latest signs that the euro zone debt crisis will further slow global growth.
The decline in China's official purchasing manager's index showed output in the world's second largest economy was cooling, denting the optimism of traders who are betting on firm demand for palm oil ahead of the Muslim fasting month of Ramadan which begin in mid-July.
Traders fretted more after Germany's manufacturing sector contracted at the fastest pace for almost three years and the euro tumbled against the dollar thanks to worries on the Spanish banking sector.
"The palm oil market just lost close to 100 ringgit in one session. People are nervous and forgetting about palm oil's bullish tone," said a trader with a foreign commodities brokerage in Kuala Lumpur.
"I suspect the investors will come in next week for bargain hunting unless there is more gloomy news in store."
The benchmark August palm oil futures on the Bursa Malaysia Derivatives Exchange tumbled 3.1 percent to end at 3,006 ringgit ($950) per tonne. It earlier went as low as 3,002 ringgit, a level unseen since May 24.
Reuters analyst Wang Tao kept his bearish target for palm oil prices at 2,993 ringgit per tonne, as its downtrend from an April 10 high of 3,628 ringgit is intact.
Asian palm oil remains firm with cargo surveyors reporting a slight increase in Malaysian exports in May.
The bulk of the orders mostly come from Pakistan and the Middle East where Muslims are getting ready to observe the fasting month starting in mid July, which is followed by another month of feasting.
Stocks are likely to drop for a third month in May, traders say, as exports probably outpaced sluggish production in Malaysia, the world's second largest supplier.
Other global commodity markets also weighed on palm oil. Oil fell below $100 a barrel for the first time since October 2011.
US soyoil for July dropped 1.2 percent in late Asian trade and the most active Jan 2013 soyoil contract on the Dalian commodity exchange lost 1.1 percent.
Comments
Comments are closed.