Palm oil edges down on renewed Europe fears

SINGAPORE: Malaysian palm oil futures slipped on Tuesday, as renewed fears over the euro zone debt crisis weighed on investor sentiment and the broader financial markets, although losses were limited by lower palm oil stocks.

Palm oil, along with other commodities such as crude oil and soybean oil, gained on Monday on news that euro zone finance minsters approved a $125 billion rescue package for struggling Spanish banks.

But investors feared that the bailout would not be sufficient to solve the crisis and the focus has now shifted to the Greek elections on June 17 that could lead to the nation's exit from the currency bloc.

"A key factor contributing to the price downtrend is the renewed eurozone debt crisis and uncertain global economic outlook, which have dampened sentiments as well as raising the prospect of lower demand for commodities, including vegetable oils," said Malaysia's Affin Investment Bank in a research note.

By the midday break, benchmark August palm oil futures on the Bursa Malaysia Derivatives Exchange lost 0.7 percent to 2,968 ringgit ($934) per tonne.

Traded volumes stood at 8,591 lots of 25 tonnes each, much thinner than the usual 12,500 lots on investor caution.

Malaysian palm oil stocks were at a 13-month low in May, and that has helped cut some losses.

Malaysian palm oil exports for the first 10 days of June fell 6.6 percent, said cargo surveyor Intertek Testing Services, going against market expectations of a stronger demand ahead of the Muslim fasting month starting in mid-July.

Another cargo surveyor Societe Generale de Surveillance reported a slight 1.8 percent increase for exports for the same period.  

Traders are eyeing a supply-demand report from the US Department of Agriculture (USDA) due later in the day that could show tighter soybean supply and lend support to palm oil.

Industry players are also watching for any volatility in price movement as this is the first time that the report will be released during active Chicago futures trading hours.

Brent crude inched towards its lowest so far this year on Tuesday, slipping below $97 on concerns the euro zone debt crisis will worsen and hurt the global economy, threatening growth in oil demand.

In other vegetable oil markets, US soyoil for July delivery gained 0.2 percent in Asian trade while the most active Jan 2013 soyoil contract on the Dalian commodity exchange lost 0.3 percent.