Palm closes lower, slowing demand and weaker rival oils weigh

• Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
• The rally was supported by expectations of lower production of the tropical oil in the first half of 2020.
• Malaysia's palm oil inventories fell to a three-month low in November due to a seasonal decline in production.

The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange closed down 0.7pc at 2,859 ringgit ($685.61). It had fallen as much as 2.5pc earlier in the session.

"Palm is adjusting its spread over gas oil and other competitive oils as demand has slowed down due to sharp rise in prices," said Anilkumar Bagani, research head at Sunvin Group, a Mumbai-based vegetable oil broker.

Palm prices were trading at near one-year lows in July but reversed fate in October with a rally that climbed to hit their highest since February 2017, on Dec. 11.

The rally was supported by expectations of lower production of the tropical oil in the first half of 2020, due to poor rainfall and lower fertiliser use in top producers Indonesia and Malaysia, according to traders and analysts.

Malaysia's palm oil inventories fell to a three-month low in November due to a seasonal decline in production. However, the decline was slower than expected.

Exports of Malaysian palm oil products during Dec. 1-15 fell between 15.5pc and 18.6pc from a month earlier, data from cargo surveyors showed.

The world's second-largest producer and exporter of palm oil, last week raised its export tax for crude palm oil for January, for the first time in one-and-a-half years.

The country calculated a reference price of 2,571.16 ringgit ($616.59) per tonne for next month.

Meanwhile, Dalian's most-active soyoil contract fell 1pc, while its palm oil contract was down 0.5pc. Soyoil prices on the Chicago Board of Trade dipped 0.4pc.

U.S. soyoils have rallied to their highest in nearly two-years, fuelled by Argentina's tax hike on its agricultural exports and hopes for increased exports following the "phase one" trade deal between the United States and China.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.