Palm hits two-week low on rising stocks

KUALA LUMPUR: Malaysian palm oil futures slipped to their lowest close in two weeks on Friday, as rising stockpiles dragged prices, though concerns over future supply tightness limited the decline.

The benchmark palm oil contract for November delivery on the Bursa Malaysia Derivatives Exchange was down 67 ringgit, or 1.37%, at 4,818 ringgit ($1,184.37) a metric ton, the lowest closing price since August 27.

The contract fell 2.25% this week after last week’s 0.72% gain.

Malaysia’s palm oil inventories hit an eight-month high in August as production climbed to the highest level since December and exports declined, data from the industry regulator showed on Thursday.

The larger-than-expected inventory build reflects a widening imbalance between recovering seasonal production and softer export demand, a CIMB Securities research report said.

“The higher stock level could cap near-term crude palm oil price upside, although downside may remain cushioned if biological tree stress continues to constrain production growth,” it said.

It pointed out that production will likely remain seasonally firm in the coming months, though a meaningful recovery in exports will be more important to curb inventories.

Cargo surveyors estimated that exports of Malaysian palm oil products for September 1 to 10 fell between 11.7% and 17.5% from a month earlier.

Oil prices slipped but remained on track to end the week above $100 a barrel for the first time since mid-May, as attacks along key Middle East shipping routes stoked prolonged supply disruption fears.

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

Dalian’s most-active soyoil contract fell 0.31%, while its palm oil contract shed 1.4%. Soyoil prices on the Chicago Board of Trade were down 1.63%.

Palm oil tracks the price movements of rival edible oils, as it competes for a share of the global vegetable oils market.