KUALA LUMPUR: Malaysian palm oil futures fell on Tuesday for a second session, hitting their lowest closing in over three weeks, as slower demand and expectations of higher production weighed on the market.
The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange slipped 47 ringgit, or 1.37%, to 3,381 ringgit ($762.34) a tonne, closing at its lowest since April 28.
The contract had risen 1.17% during early trade.
A lack of follow-up buying from destination markets and some washouts of palm oil by China put a break on the upward momentum, said Anilkumar Bagani, research head of Mumbai-based vegetable oils broker Sunvin Group.
“Palm oil is now seen giving up its tighter spread over soft oils, but it seems destination markets are not in a hurry and waiting for a further widening of palm oil discount over competition,” Bagani added.
A recovery in Malaysia’s production is also adding pressure to the market, with investors awaiting industry estimates to determine the extent of output growth, he said.
Brokerage UOB KayHian said crude palm oil prices could resume an uptrend once the market realises that palm oil supplies would be tight going into the second half of the year and even into 2024.
“Based on our recent ground checks, oil palm trees are ‘very sick’ after three La Nina events, having been under-fertilised for the last 3-4 years and subjected to poor agromanagement,” UOB KayHian said in a note.
India’s palm oil imports in May are set to fall to their lowest in 27 months as its rare premium other edible oils prompted buyers to cancel cargoes and replace them with soyoil and sunflower oil, dealers and cargo surveyors said.
In related oils, Dalian’s most active soyoil contract fell 0.6%, while its palm oil contract fell 0.4%. Soyoil prices on the Chicago Board of Trade were down 1.2%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
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