SINGAPORE: Malaysian palm oil futures edged lower on Wednesday, weighed down by recent strength in the ringgit, although losses were limited after a report showed stocks dropped to their lowest in seven months as exports outpaced weak output growth.
Prices were expected to rise after the mid-day break as the Malaysian Palm Oil Board (MPOB) reported a steep 10.9 per cent drop in stocks to 2.17 million tonnes, far exceeding market expectations of a 3.8 per cent drop.
But the ringgit’s recent rise on short-covering ahead of the upcoming election has made crude palm oil more expensive for overseas buyers and lowered refiners’ margin, keeping some investors on the sidelines.
The currency hit a near three-month high against the dollar on Wednesday after the government said the Southeast Asian nation will hold its general elections on May 5.
“The market is facing selling pressure with the strengthening ringgit as it dampens refining margin,” said a dealer with a foreign commodities brokerage in Malaysia.
The benchmark June contract on the Bursa Malaysia Derivatives Exchange fell one per cent to close at RM2,370 per tonne —- also the low for the day. Prices touched a high of RM2,419 on Tuesday, a level last seen on March 28.
Total traded volumes stood at 34,101 lots of 25 tonnes each, slightly lower than the average 35,000 lots seen so far this year.
Technicals showed palm oil is biased to drop to RM2,350 per tonne, as it did not break a resistance at RM2,420, said Reuters market analyst Wang Tao.
Exports of Malaysian palm oil products for April 1 to 10 inched up 3.5 per cent to 456,440 tonnes, compared with 441,025 tonnes shipped during the same period last month, cargo surveyor Intertek Testing Services said on Wednesday.
Another cargo surveyor, Societe Generale de Surveillance, is expected to release its export data later in the day.
Palm oil stocks are now closer to the psychological two million-tonne level. Leading analyst Dorab Mistry has forecast prices could rise to RM2,400 to RM2,700 by the end of May as stockpiles fall below that level.
In other markets, Brent crude futures steadied around US$106 per barrel on Wednesday after China’s total imports surged in March, suggesting that recovery in the world’s No 2 oil consumer is gathering momentum.
In vegetable oil markets, US soyoil for May delivery edged 0.1 per cent lower in late Asian trade. The most active September soybean oil contract on the Dalian Commodities Exchange closed 0.3 per cent higher.– Reuters
Source : Business Times