Palm Ends 5-Day Rally As Buyers Defer Purchases

PALM oil futures dropped for the first time in six days yesterday

after a rally to the highest price in more than three months prompted

speculation that some buyers may be deferring purchases.

October-delivery futures fell 0.3 per cent to close at RM2,562
a

metric ton on the Malaysia Derivatives Exchange in Kuala Lumpur. Prices

had gained 3.9 per cent in the five days to Monday’s close, which was

the highest since April 9.

“There’s a bit of profit-taking after

the recent rally and some buyers might be put off by the high prices,”

said Ivy Ng, an analyst at CIMB Investment Bank Bhd.


“Palm oil has been riding on the strength of external markets, like

crude oil and soybeans, and we may witness some volatility in coming

days.”

Palm oil has rebounded from a seven-month low on July 7 on

speculation demand may rise in Asian countries and as the La Nina

weather event may hurt output in the biggest producers.

China,

India, Pakistan and Indonesia mark festivals in the quarter ending

September 30, typically stoking edible-oils demand. Palm oil has also

risen with crude oil, soybeans and equities.

November-delivery

soybeans reached US$10.295 a bushel in intraday trade in Chicago Monday,

the highest level for a most-active contract since January 11, as

drought slashed grain output in Russia and parts of Europe. In July, the

oilseed jumped 11 per cent, the steepest monthly gain since May 2009.

Crude

oil traded near a three-month high today after breaching US$81 a barrel

for the first time since May as the outlook for the global economy

improved.

Oil for September delivery traded at US$81.17 a barrel at 5.25 pm Singapore time.

“Most

people expect palm oil production in Malaysia to be less than forecast

because of weather,” CIMB’s Ng said. “If production turns out to be

better, that will boost supplies and lead to a correction in prices.”

La

Nina, which causes higher-than-normal rainfall in Asia, can disrupt

palm oil production in Indonesia and Malaysia, the two top growers, and

cause dry weather in North America, hurting soybean crops. Palm and

soybean oils are substitutes and account for more than 60 per cent of

global edible oils supply.

Development of La Nina will be a

bullish factor for palm oil prices should the wet weather last until the

end of this year or early next year, Standard & Poor’s said in a

report Monday.

Palm oil may trade between RM2,400 and RM2,600 a

ton over the rest of the year because of good demand and low stockpiles,

it said.

December-delivery soybean oil fell as much as 1 per

cent to 40.77 cents a pound after jumping 1.5 per cent Monday. The

vegetable oil’s premium over palm oil rose to US$94.29 a ton from

US$93.88 yesterday, according to Bloomberg data.

CME Group Inc’s

October-delivery palm oil contract, pegged to the Malaysian benchmark

price, dropped 0.1 per cent to US$805.50 a ton.

On the Dalian

Commodity Exchange, January-delivery palm oil ended 0.1 per cent lower

at 6,900 yuan a ton, while soybean oil rose 0.1 per cent to 7,846 yuan a

ton.

Leave a Reply