Malaysian palm oil futures dropped on Thursday as investors' avoided risky assets on concerns that a key European leaders' summit may not reach a consensus on the debt crisis in the region. Losses, however, were limited as market players came back later in the session as the market was seen as oversold.
Palm oil prices have see-sawed for this week on conflicting reports over European governments reaching a deal to contain the crisis and re-capitalise banks in the region. "Palm oil's fundamentals are slightly bullish but that has been stamped out by the greater macro bear called the eurozone," said a trader with a foreign commodities brokerage.
Benchmark January palm oil futures on the Bursa Malaysia Derivatives Exchange settled down 0.9 percent at 2,866 Malaysian ringgit ($923). The contract earlier fell to an intra-day low of 2,822 ringgit, coming close to a one-week low hit on Tuesday. Traded volumes stood at 31 lots of 25 tonnes each, compared to the usual 12,500 lots as more market players returned to take up positions.
The market on Thursday came under pressure after cargo surveyor Intertek Testing Services reported Malaysian palm oil exports for the first 20 days of October rose 5.5 percent to 1.03 million tonnes from a month ago. Another cargo surveyor Societe Generale de Surveillance said exports for the same period rose 6.8 percent.
"The market went up yesterday on the higher exports and it was expected but it is clearly not enough when production could be 10 percent higher," said another trader in Kuala Lumpur. October exports have largely been driven by higher crude palm oil shipments out of Malaysia after Indonesia kept export taxes on its cargoes virtually unchanged, triggering a shift.
But Malaysian crude palm oil has lost that discount to the Indonesian grade, potentially slowing down orders in the coming days. US soyoil for December delivery dropped 0.3 percent in Asian trade on seasonal harvest pressure and mounting concerns over the eurozone crisis stalling economic growth and commodity demand. China's most active May 2012 soybean oil contract and RBD palm olein both fell more than 2 percent.