Malaysian palm oil slid more than 3 percent on Thursday as the market snapped two sessions of gains to drop to its lowest in almost six weeks, under pressure from plentiful global edible oil supplies and slowing demand. Crude oil prices at six-year lows have reduced the appeal of vegetable oils in making renewable fuels, while local palm oil yields are expected to improve later in the year.
"Palm oil has been unable to hold on to gains in the face of persistent weakness in soy complexes and lower energy prices," said one Kuala Lumpur-based trader. "The bearish scenario in commodity markets will keep pressure on palm oil." The benchmark April contract finished down 3.5 percent, or 77 ringgit, at 2,133 ringgit ($588) per tonne after dropping to 2,128 ringgit a tonne, its lowest since December 19. Traded volumes stood at 56,385 lots of 25 tonnes each, well above the typical 35,000 lots.
On the technical front signals will be mixed for palm oil until it gets out of a neutral range of 2,154-2,211 ringgit per tonne, Wang Tao, a Reuters market analyst for commodities and energy said. Recent flooding in Malaysia is expected to dent palm oil output in the first quarter but should lead to higher yields for the rest of the year, putting pressure on prices in a well supplied market.
The demand remains weak. Exports of Malaysian palm oil products during January 1-25 fell 17.7 percent from a month earlier, cargo surveyor Intertek Testing Services said on Monday. In other vegetable oil markets, US soyoil fell 1.4 percent in Asian trade and the most active soybean oil contract on the Dalian Commodity Exchange lost 1 percent.
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