BEIJING/SINGAPORE: Malaysian palm oil futures reversed early gains on Friday to log its sharpest weekly fall in over a year, as traders assessed concerns over escalating tensions in the Middle East and slowing palm oil demand.
The benchmark palm oil contract for July delivery on the Bursa Malaysia Derivatives Exchange settled down 1.41%, or 56 ringgit, to 3,928 ringgit ($821.59) a metric ton, down for a sixth consecutive session. It had risen as much as 1.4% during early trade.
For the week, the contract slumped 8.3%.
Explosions echoed over an Iranian city on Friday in what sources described as an Israeli attack, but Tehran played down the incident and indicated it had no plans for retaliation – a response that appeared gauged towards averting region-wide war.
Malaysian palm oil extends losses
“Speculators would rather cover their short positions now because of fears that the escalating tensions in the Middle East will mean a prolonged war, which will push up crude oil prices and underpin palm oil prices,” said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.
But weakness in prices of competing vegetable oil is eating into palm oil’s demand and will cap gains, he said.
Oil slipped on Friday after prices spiked earlier on reports that Israel had attacked Iran as market fears of a major escalation to hostilities in the Middle East appeared to ease.
Weaker crude oil futures make palm a less attractive option for biodiesel feedstock.
In related oils, Dalian’s most-active soyoil contract fell 0.6%, while its palm oil contract was down 0.97%. Soyoil prices on the Chicago Board of Trade eased 0.6%.
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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