Palm oil futures tumbled as much as 3.4 per cent on the Malaysia Derivatives Exchange, extending last week’s 6.2 per cent slump, on concern production will increase in the second half.
Investors are awaiting June production, inventory and export data to be released by Malaysian Palm Oil Board on July 10. Stockpiles in Malaysia, the second largest producer, expanded for the first time in six months in May as output surged 8.5 per cent, the biggest on-month increase in a year.
“The market is focused on the production number coming in,” Alvin Tai, a plantation analyst at OSK Research Sdn Bhd, said by phone from Kuala Lumpur. “In the next couple of months, it will be quite a significant increase. That is the key factor weighing on the palm oil market.”
Palm oil for September delivery fell as much as 74 ringgit to 2,101 ringgit ($594) a metric ton. The contract traded at 2,130 ringgit at the 12:30 p.m. local time trading pause.
Indonesia, the largest producer, doesn’t issue monthly data. Indonesian producers “can already tell what their production will be like in September and October,” Tai said. “Whatever they need to sell, they will just sell. Indonesia doesn’t bother keeping inventory. It means Malaysia’s exports will be affected.”
Malaysia’s exports gained 2.3 per cent in May, according to the Palm Oil Board. Preliminary data from independent surveyors shows June exports were little changed. Exports dropped to 1,227,663 tons from 1,227,894 tons in May, according to Societe Generale de Surveillance. Intertek estimates June exports gained 1.6 percent to 1,230,741 tons, from 1,211,716 tons in May.
Palm oil also tracked a decline in prices of other commodities, including crude oil.
Crude oil in New York dropped as much as 3.1 per cent to US$64.65 a barrel in Asian trading, and was last at US$65.34 at 12:32 pm in Singapore. Eighteen of 37 analysts surveyed by Bloomberg News, or 49 per cent, said oil futures will decline through July 10.
“If crude oil pulls back, palm oil pulls back even more,” as demand for the vegetable oil as a bio-diesel eases, Tai added. — Bloomberg
Source : Business Times