KUALA LUMPUR: Malaysian palm oil futures fell in choppy trade on Monday, dragged lower as oil prices slid to fresh 5-1/2-year lows, although losses in the ringgit and concerns over floods curbing palm supply propped up the market.
Oil prices dropped to fresh 5-1/2-year lows on Monday as worries about a surplus of global supplies and lacklustre demand dragged
on oil markets.
Cheaper oil prices dent energy sector demand for palm as a biodiesel feedstock. However, they have also pulled down the Malaysian ringgit against the U.S. dollar, making ringgit-priced palm oil more attractive for overseas buyers and refiners. The ringgit, Asia’s weakest currency in 2014, fell 0.6 percent to 3.5350 on Monday.
“It’s a very uncertain market,” said a trader with a foreign commodities brokerage in Kuala Lumpur. “We have good and bad factors in the market. Externally the market is weak – Dalian and crude oil are coming down. But there’s also a weak ringgit, followed by persisting floods.”
The benchmark March contract had dropped 0.9 percent to 2,262 ringgit ($640) per tonne by Monday’s close, at the lower end of the day’s trading range of 2,262 and 2,297 ringgit.
Total traded volume stood at 32,944 lots of 25 tonnes, below the usual 35,000 lots.
Palm oil fell 15 percent in 2014, its biggest decline since 2012, but losses were less steep than initially expected due to monsoon floods which submerged parts of the country in what local authorities say is the worst flooding in decades.
The benchmark contract ended the year at 2,266 ringgit, above an October Reuters poll that had forecast 2,161 ringgit. The hardest-hit states of Kelantan, Terengganu, Pahang and Perak together account for about 30 percent of Malaysia’s crude palm oil supply.
Analysts say floods will take a toll on palm oil output in Malaysia, the world’s second-largest grower, and eat into stockpiles. “Malaysian palm oil stocks are likely to fall further in January due to the seasonal drop in output, as well as the ongoing floods, while exports are likely to be relatively stable in view of the upcoming Chinese New Year festivities,” said CIMB Investment Bank analyst Ivy Ng in a research note.
In vegetable oil markets, the most active May soybean oil contract on the Dalian Commodity Exchange fell 1.4 percent in late Asian trade, while the U.S. soyoil contract for March rose 0.4 percent.
Source : Daily Times]]>