Malaysian palm oil futures declined at Thursday's close as the market corrected following a two-day rally and higher output forecasts by industry analysts weighed on traders' sentiment. Benchmark palm oil futures for December on the Bursa Malaysia Derivatives Exchange fell 1.4 percent to 2,616 ringgit ($629.60) a tonne at the close. Traded volume stood at 40,819 lots of 25 tonnes each. Prices had risen to a two-week high of 2,661 ringgit on Wednesday.
"I see this as a correction because in the past two days, the market has climbed about 100 ringgit. The fundamentals have not changed," a Kuala Lumpur-based trader said. Another Kuala Lumpur-based trader said the bearish outlook given by the industry analysts at an industry conference in the Malaysian capital had weighed on the market. "Market has drifted down due to the effects of what the analysts said. Despite the ringgit being so weak, market could not be sustained," he said.
The Malaysian ringgit slid 0.5 percent to 4.2110 to the dollar on Thursday, its lowest in over seven months. The weakness in the ringgit, palm's traded currency, however continues to support the market as it makes the tropical oil cheaper for holders of foreign currencies. Earlier on Thursday, leading industry analyst Dorab Mistry said at the Palm Oil Trade Fair and Seminar that palm output in Indonesia and Malaysia will likely rise next year to surpass 2015 production.
James Fry, the chairman of commodities consultancy LMC International said production for the last quarter of 2016 will increase. Thomas Mielke, editor of Hamburg-based newsletter Oil World, added that global output for the calendar year 2016 was expected to drop 3.3 million tonnes to 59.2 million tonnes. Mielke lowered a forecast for Malaysia's 2016 output and said the palm futures were expected to hit 2,900 to 3,000 ringgit a tonne in the fourth quarter or in early 2017, citing prices being currently undervalued.
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