Malaysian palm oil futures fell on Friday after hitting a 15-month high earlier in the week as buyers started looking at alternatives such as soybean oil. The benchmark December contract on the Bursa Malaysia Derivatives exchange closed down 1.1 percent, reversing gains of as much as 1.1 percent earlier in the day. Traded volume was 49,844 lots of 25 tonnes each, above the daily average of 35,000 lots.
The benchmark still posted a 1.9 percent gain for the week, extending its 11 percent jump in the previous week. Palm prices hit a 15-month high of 2,460 ringgit on Tuesday. The two-week rally has started to weakens demand for palm oil, traders said, as the spread with rival soybean oil narrows. "Buyers can actually switch to alternatives as current prices are way to expensive for the end consumer," said a trader in Kuala Lumpur.
The El Nino phenomenon is also causing dry weather conditions across south-east Asia, lowering output levels and strengthening prices. It is likely to reduce Malaysia's palm oil output by 1 million tonnes to 19 million tonnes in 2016, and boost prices to 3,000 ringgit per tonne, according to the chief executive officer of the Malaysian Palm Oil Council.
On the technical front, palm oil may retrace to support at 2,349 ringgit a tonne after it failed to break resistance at 2,464 ringgit, according to Wang Tao, Reuters market analyst for commodities and energy technicals. In competing vegetable oil markets, the US December soyoil contract fell 0.5 percent in late Asian trade.
Comments
Comments are closed.