Malaysian palm oil futures ended down 1.3 percent on Tuesday, weighed down by weakness in other vegetable oils and bearish inventory and production data from the previous session. The benchmark June crude palm oil contract on Bursa Malaysia Derivatives closed at 3,373 ringgit ($1,116) a tonne, after earlier falling as low as 3,345 ringgit.
Traded volume on the June contract was at a near three-week high at 21,496 lots of 25 tonnes each, versus Monday's total at 15,819 lots. "Look at the export figures yesterday - it is worrying," said one trader. "External factors are crude on the way down, and corn also down."
"Maybe this correction will take us to the brink of 3,300 and at that point, people should come back in again," he added. "The only positive factor for palm oil is the huge discount of soybean oil. On Monday, palm oil touched a peak at 3,454 ringgit - a level not seen since March 21 - despite moving into a higher output cycle.
"We predict that CPO inventory will rise another 5 percent to 1.7m tonnes in April due to higher output," Ivy Ng Lee Fang, an analyst at CIMB, said in a note. Other vegetable oil markets eased on Tuesday, with US soyoil for May delivery slipping 0.2 percent. The most-active September 2011 soyoil on the Dalian Commodity Exchange traded at 10,210 yuan versus an open at 10,282 yuan.
ICDX's June CPO futures contract was at 9,785 rupiah per kg, compared to 9,755 rupiah per kg when it opened. Market volume was 1,865 lots of 10 tonnes each. Late on Monday, palm oil producer BW Plantation told Reuters in an interview that production in top global producer Indonesia would be weak this year.
Leading industry analyst Dorab Mistry said on Tuesday that palm oil may fall nearly 13 percent to below 3,000 Malaysian ringgit on fast rising Southeast Asian output and volatility in financial markets. "A lot of (vegetable) markets are under pressure today," said Abah Ofon, a Singapore-based analyst at Standard Chartered Bank. "(Mistry) might affect sentiment but its just confirmation of a downward trend in the near-term.
"I disagree with Mistry on the short-term outlook - there is still room for palm oil to move higher - there is going to be a lot of impact from external markets which may not have been taken fully into account."
A Reuters technical analysis showed palm oil is expected to rise to 3,470 ringgit per tonne based on a Fibonacci retracement analysis. In other markets, Brent crude was firmer at around $125 a barrel, edging up from a sharp fall the previous day, as the International Energy Agency issued a fresh warning that high fuel prices could erode demand.
Many commodity markets had come under early pressure on Tuesday after long-term commodity bull Goldman advised its clients to take profit as there is a strong chance that commodity prices may reverse. Palm oil analysts say that every $10 per barrel change in the crude oil price could result in a 200 ringgit per tonne change in the crude palm oil price. Although palm oil can be a feedstock for biodiesel, it is more likely to be used to fill the gaps left behind by soyoil and rapeseed oil that are increasingly used in the energy sector.
Comments
Comments are closed.