Malaysian Palm Oil Snaps 4-day Winning Streak on Technical Correction

KUALA LUMPUR: Malaysian palm oil futures fell on Monday after a 4-day winning streak, traders said, with concerns over sluggish export demand in February adding pressure. 

Palm jumped over 9 percent last week to its biggest weekly gain in six years, after Indonesia approved a near-threefold rise in biodiesel subsidies that is expected to boost use of the tropical oil by its top producer.

While the move prompted investors to take more bullish positions, some traders said the contract was severely overbought and will need to correct itself. 

“Prices have come down mainly due to a technical correction on the overbought intraday chart,” said a trader with a foreign commodities brokerage in Kuala Lumpur. 

“Last week the subsidy news came when the market was under everybody started buying. But the bullish impact on palm oil stocks will only be known over the next few months,” the trader added. 

The benchmark April contract closed 1.2 percent lower at 2,317 ringgit ($651) per tonne on Monday. Prices in early trade briefly touched 2,357 ringgit, their highest since Jan. 15.

Total traded volume stood at 61,974 lots of 25 tonnes, much higher than the usual 35,000 lots.        

The higher Indonesian biodiesel subsidies of 4,000 rupiah per litre, from 1,500 rupiah now, may be implemented as soon as March and will translate to more palm blended into biofuel to feed the country’s targeted 17.05 million kilolitres diesel consumption this year. 

Analysts said palm prices will likely rise in the next few months as the higher subsidies soak up Indonesian palm inventories, at a time when supplies from No.2 grower Malaysia are expected to be tight due to unfavourable weather.

“The biodiesel subsidy hike certainly gives a boost to the Indonesian plantation sector as it will help double the domestic palm oil demand for biodiesel to about 1.7 million metric tonnes from 800,000 metric tonnes last year,” Public Investment Bank said in a Monday note. 

“It will also partly help ease Indonesia’s mounting inventories that currently stand at an estimated 2.45 million metric tonnes last year.”

Market players also watched for industry data on Malaysia’s January end-stocks which the Malaysian Palm Oil Board will release on Tuesday, as well as cargo surveyor export data. 

The Kuala Lumpur-based trader added that Malaysian palm oil exports for the first 10 days of February is anticipated to be weaker than a month ago.

A Reuters survey showed January inventories dropping to a six-month low of 1.77 million tonnes. 

Growers body, the Malaysian Palm Oil Association, estimated that production last month fell 17.1 percent to 1.13 million tonnes.

Brent crude slipped on Monday as a slump in Chinese imports pointed to lower fuel demand in the world’s biggest energy consumer, outweighing falling U.S. oil rig counts and signs of healthy U.S. growth.

Palm, soy and crude oil prices at 1040 GMT

Contract         Month  Last Change   Low    High Volume
MY PALM OIL      FEB5  2310 -36.00  2305    2314   286
MY PALM OIL      MAR5  2315 -36.00  2302    2358  1216
MY PALM OIL      APR5  2320 -29.00  2307    2357 30522
CHINA PALM OLEIN MAY5  4916 +24.00  4884    4934 397022
CHINA SOYOIL     MAY5  5500 -16.00  5488    5538 319444
CBOT SOY OIL     MAR5 31.70  -2.30 31.64   32.09 11825
INDIA PALM OIL   FEB5 457.20  -2.30 456.20  463.90   890
INDIA SOYOIL     FEB5 618.30  -8.40 617.30  630.30 18020
NYMEX CRUDE      MAR5 52.19  +0.50 51.65   53.40 41971

  Palm oil prices in Malaysian ringgit per tonne
  CBOT soy oil in U.S. cents per pound
  Dalian soy oil and RBD palm olein in Chinese yuan per tonne
  India soy oil in Indian rupee per 10 kg
  Crude in U.S. dollars per barrel
($1 = 3.5600 Malaysian ringgit)    
($1 = 6.2472 Chinese yuan)

($1 = 62.11 Indian rupee)- Reuters

Source : The Star


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