Malaysian palm oil failed to hold on to earlier gains and ended lower on Thursday as the strong ringgit dragged, although losses were curbed by firm export demand and prospects of tighter supplies of the vegetable oil this month. The benchmark October contract on the Bursa Malaysia Derivatives Exchange edged down 0.7 percent to 2,290 ringgit ($721) per tonne by the day's close, with prices touching an over nine-month low of 2,285 ringgit in late trade.
Total traded volume on Thursday stood at 47,097 lots of 25 tonnes, above the average 35,000 lots. "Today morning the market was unable to penetrate the resistance at 2,320 ringgit, so it is coming lower to test the support level at 2,280 ringgit," said a trader with a local commodities brokerage.
Market players, however, expect palm oil output in top producers Indonesia and Malaysia to slow down in July as plantation workers go on holiday for Eidul-Fitr. "Palm oil production is expected to be down as plantation workers leave for a long holiday. Exports are also surprisingly good and end-stocks are going to go down," said a second Kuala Lumpur-based trader.
Palm stocks in Malaysia, the world's No 2 producer, dropped to a one-year low of 1.7 million tonnes at end-June, with some traders and analysts anticipating stockpiles to shrink to 1.5 million tonnes in July. Technicals showed that Malaysian palm oil looks neutral in a range of 2,298-2,328 ringgit per tonne, and an escape will point a direction, said Reuters market analyst Wang Tao.
Indonesia, the world's biggest palm grower, expects its crude palm oil production to reach 29.5 million tonnes this year, an agriculture ministry said, up 6.3 percent from 27.8 million in 2013. In other competing vegetable oil markets, the US soyoil contract shed 0.1 percent in late Asian trade, while the most active soybean oil contract on the Dalian Commodities Exchange gained 0.2 percent.
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