Palm extends losses to third session on weak demand, expectations of higher output

KUALA LUMPUR: Malaysian palm oil futures reversed earlier gains on Thursday, closing lower for a third straight session, pressured by sluggish export demand, expectations of higher output and weaker crude oil prices.

The benchmark palm oil contract for November delivery on the Bursa Malaysia Derivatives Exchange was down 38 ringgit, or 0.78%, at 4,814 ringgit  ($1,194.54) a metric ton at the close.

Weaker exports, better-than-expected production and easing energy prices have pushed palm oil to trade at a premium over gas oil, while it has also lost competitiveness against soybean oil, said Anilkumar Bagani, commodity research head at brokerage Sunvin Group.

Bagani said recent rains in Malaysia could support palm production there, though there were growing concerns over potential production losses next year due to fire hotspots in Indonesia’s Kalimantan region.

“A moderate recovery in Chinese vegetable oils helped palm prices rebound earlier in the day,” he said.

Dalian’s most-active soyoil contract rose 0.78%, while its palm oil contract gained 0.06%. Soyoil prices on the Chicago Board of Trade were down 1.86%.

Palm oil tracks the price movements of rival edible oils, as it competes for a share of the global vegetable oils market. Cargo surveyors estimated that exports of Malaysian palm oil products for August 1-25 fell between 11.4% and 20% from a month earlier.

Oil prices fell on Thursday, extending a streak of losses, on expectations that talks between Iran and Qatar might open the Strait of Hormuz and reduce supply disruptions from the war in the Middle East.

Weaker crude oil futures make palm a less attractive option for biodiesel feedstock.

The ringgit, palm’s currency of trade, weakened 0.2% against the dollar, making the commodity slightly cheaper for buyers holding foreign currencies.