KUALA LUMPUR: Malaysian palm oil futures ended lower on Wednesday over expectations of rising production and weaker demand, following an increase in export quotas by top producer Indonesia.
The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange fell 85 ringgit, or 1.7%, to 4,904 ringgit ($1,116.19) a tonne.
“Anticipation of stronger production in July, reports of millers shutting operations due to unfavorable market conditions, as well as skyrocketing freight prices are the main contributors to volatility in the palm market,” said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.
The market is keeping a watch on exports, which may continue to weaken due to lack of demand, surging freight costs and difficulty in getting vessels, he added.
Palm oil ends higher on mill closures, rival oil strength
Demand for Malaysian palm oil has been disrupted by larger rival Indonesia’s return to the export market after a recent halt in shipments.
Indonesian palm oil companies will be offered larger export quotas under new plans to adjust rules on local cooking oil sales, officials said late Tuesday, as part of government efforts to improve domestic distribution after a months-long price crisis.
Dalian’s most-active soyoil contract fell 0.06%, while its palm oil contract eased 0.06%. Soyoil prices on the Chicago Board of Trade were down 0.3%.
Palm oil is affected by price movements in related oils, as they compete for a share in the global vegetable oils market.
Palm oil may test a support at 4,742 ringgit per tonne, as it could have completed a bounce from the recent low of 4,493 ringgit, Reuters technical analyst Wang Tao said.
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