Malaysian palm oil futures slid to a near eight-month low on Wednesday as worries over rising edible oil supplies amid lagging demand weighed, although expectations of a potential El Nino hitting crops curbed losses. Industry data released on Tuesday showed that palm oil stocks in Malaysia, the world's second-largest producer, rose to a four-month high of 1.84 million tonnes at the end of May, after a pick-up in output outstripped exports of the tropical oil.
"The anticipation of rising stocks and bumper US soybean harvest may continue to dampen near-term CPO prices," said CIMB Investment Bank analyst Ivy Ng, adding that palm end-stocks will likely rise to 1.93 million tonnes in June. "However, the rising supply risks due to the Q1 2014 drought and potential El Nino, increasing crude oil prices and biodiesel mandate are expected to support CPO prices at current levels," added Ng, who sees prices trading between 2,300-2,600 ringgit this month. The benchmark August contract on the Bursa Malaysia Derivatives Exchange stretched its losing streak into a fifth day to fall to 2,364 ringgit late Wednesday, its lowest since October 14, before settling at 2,379 ringgit ($741) per tonne by the close, down 0.3 percent.
Total traded volume stood at only 27,662 lots of 25 tonnes compared with the usual 35,000 lots. Technicals showed palm oil is expected to drop to a support at 2,341 ringgit per tonne, a break below which will lead to a further loss towards 2,260 ringgit, said Reuters market analyst Wang Tao. Market players and analysts say that while palm inventories will likely keep rising in coming months, export demand could turn sluggish as buyers complete restocking activities for a Muslim festival that begins at end-June.
Exports of Malaysian palm products slipped 0.3 percent between June 1-10 compared to a month ago, data from cargo surveyor Intertek Testing Services showed on Tuesday. "We expect flat export growth as the completion of restocking activity for Ramadan may cause a temporary slowdown in demand from India and Pakistan," said Kenanga Investment Bank analyst Alan Lim in Kuala Lumpur.
Comments
Comments are closed.