Malaysian palm oil slid more than 2 percent on Monday to a near one-week low on concerns over slowing global demand for the vegetable oil, as reflected by export data. The benchmark December palm oil contract on the Bursa Malaysia Derivatives Exchange finished down 2.2 percent to 2,278 ringgit ($540) a tonne, falling from a two-week high of 2,386 ringgit reached last week. The market closed at its weakest since October 20.
"Demand doesn't seem to be that promising... It is low and can get worse as we go further forward," said a Kuala Lumpur-based trader, adding that rising demand would hinge on top consumers of palm oil, China and India. "China has reduced some interest rates, but people are still not confident it can spur the economy. Likewise in India, stocks are still full and since Deepavali demand is no more and there is no other festive season, you don't see strong demand."
However, traders expect the market to trade rang bound in the next few weeks, supported by a weak ringgit, weather uncertainty and falling production. Traded volume stood at 38,893 lots of 25 tonnes each, above average 35,000 lots usually traded in a day. Despite a weaker ringgit against the dollar, the market was bearish on palm's export demand which has slowed this month. Data from cargo surveyor Intertek Testing Services on Monday showed a 9.2 percent drop in exports from October 1-25 compared with a month ago.
Another cargo surveyor Societe Generale de Surveillance said exports during the period fell 8.4 percent. A weaker ringgit usually lends some support to palm prices, making it cheaper for holders of other currencies. Palm oil still targets 2,293 ringgit per tonne, as it has broken a support at 2,328 ringgit, said Reuters market analyst for commodities and energy technicals Wang Tao. In competing vegetable oil markets, US December soyoil contract and the January soybean oil contract on the Dalian Commodity Exchange were down 0.7 percent and 1.1 percent respectively.