Malaysian palm oil closed lower on Monday with China shut for a holiday and as investors stayed on the sidelines ahead of a flurry of data due at the end of the week. The benchmark August crude palm oil contract on the Bursa Malaysia Derivatives Exchange ended 1 percent down, at 3,388 Malaysian ringgit ($1,125) a tonne after earlier going as high as 3,440 r inggit per tonne.
Overall traded volume stood at 9,549 lots of 25 tonnes each, versus a total of 13,578 lots on Friday. "A lot of players are staying on the sideline and volume is very small," said one trader. "Without direction from the Dalian." The most-active January 2012 soyoil contract on Dalian climbed 2.1 percent on Friday, although Chinese markets were closed on Monday for the Dragon Boat Festival.
"The physical market hasn't really moved ... people are waiting for some news or indications." The trader added that the Malaysian Palm Oil Board is due to release stocks, export and production data on Friday, which may offer greater direction as the week progresses.
Malaysian palm oil stocks likely soared to a 16-month high in May as strong production growth overtook a modest increase in exports, a Reuters survey showed on Monday. Also on Friday, Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance issue June 1-10 palm oil export numbers. Ahead of these numbers, the US Department of Agriculture will release its June supply-demand report on Thursday. "This week were are looking at the US crop progress report," said Ker Chung Yang, investment analyst at Phillip Futures.
"We are hearing that planting progress is not that encouraging but we're waiting for the official report to confirm that. This is going to be an eventful week for palm oil and oilseeds," he added. "Benchmark prices will likely be supported above 3,200 ringgit (in the second half) but upside I doubt it will go above 3,600 ringgit." Last Friday, palm oil prices hit 3,465 ringgit, its highest peak since March 21.
But later that day, data showed that US employers in May hired the fewest number of workers in eight months, and the unemployment rate rose to 9.1 percent, feeding worries about the world's biggest economy. The dollar fell broadly on the data, while the euro hovered near a one-month high on optimism that Greece will receive its next aid payment and avoid restructuring its debt.
Palm oil traders said the reaction to the US data had been factored into benchmark prices. Investors are also concerned about a possible interest rate hike by China, which could hit imports. "Generally, there is weakness in overall commodities," said another palm oil analyst. "There is a feeling the job sector isn't looking too good and that creates a fear of lower commodity demand.
"The same goes for China ... we are expecting lower demand in the second half from China and watching rate moves there." ICDX's August CPO futures contract ended at 9,825 rupiah per kg, compared to 9,945 rupiah per kg when it opened. Market volume was 1,379 lots of 10 tonnes each. In related markets, Brent crude slipped toward $115 a barrel on Monday as concern about demand ahead of a key Opec meeting later this week weighed on the market.