Malaysian palm oil fell for a second session on Friday and was set for a small weekly decline, as high inventory levels prompted traders to take profits after earlier gains. The January benchmark palm oil contract on the Bursa Malaysia Derivatives Exchange lost 1.1 percent to 2,323 ringgit ($539.35) a tonne, wiping out a 2 percent gain on Wednesday. "The selloff is speculative in nature," said a Kuala Lumpur-based trader, adding that weak exports which contributed to high stockpiles of palm had also dampened sentiment.
Malaysian palm stocks at the end of September were at a three-year top of 2.63 million tonnes, weighing on prices as demand from top consumer China is expected to remain slow. A Reuters poll showed that October inventories are set to further rise, pending data from government body Malaysian Palm Oil Board (MPOB) next Tuesday. Palm prices were briefly lifted on Wednesday after top exporter Indonesia announced the companies that had won quotas to supply biodiesel to state-owned energy firm Pertamina. Indonesia however would need to increase biodiesel fuel subsidies in order for its take-up to succeed.
Traded volume stood at 42,912 lots of 25 tonnes each, above the average 35,000 lots usually traded in a day. Palm oil may drop to 2,232 ringgit per tonne, as it failed again to break resistance at 2,373 ringgit, said Reuters market analyst for commodities and energy technicals Wang Tao. In other vegetable oil markets, the US December soyoil contract rose 0.6 percent, while the January soybean oil contract on the Dalian Commodity Exchange lost 1.4 percent.