Malaysian palm oil futures lost ground on Tuesday, falling for a second session on slowing demand from top importers and the crude oil market facing headwinds. Weakening demand and ample supplies of rival soybean oil are likely to cap prices of the tropical product which hit its highest since May 2014 at 2,648 ringgit on Monday.
The palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange finished down 11 ringgit, or 0.4 percent at 2,588 ringgit ($623.6) per tonne. The market fell 1.8 percent on Monday after estimates from cargo surveyors slowed declining exports. "Increasing soybean exports from Brazil are giving stiff competition to palm oil prices," said one trader in Kuala Lumpur. "We see pressure on prices in the coming months."
Traded volume stood at 52,367 lots of 25 tonnes each. Palm oil rose in the first half of the day as gains were driven by a rally in crude oil prices. But Brent crude oil futures pared gains on Tuesday after Qatar said that four of the world's largest producers agreed to freeze output at January levels, provided that other major exporters followed suit.
Palm oil often tracks movement in energy markets for increasing use of vegetable oils in making renewable fuels.
Palm oil shipments from Malaysia fell in the first half of February, dropping 16.1 percent compared with a month earlier according to Intertek Testing Services cargo surveyor data, while Societe Generale de Surveillance registered a 14.2 percent fall. Shipments of the tropical oil have been falling in recent weeks as a slowing Chinese economy eases demand for palm. The winter season in the northern hemisphere also reduces demand for palm, as the vegetable oil solidifies in cold climates.
On the technical front, palm oil may retest a resistance at 2,645 ringgit per tonne as suggested by its wave pattern and a Fibonacci projection analysis, said Wang Tao, Reuters market analyst for commodities and energy technicals. In competing vegetable oil markets, the May soybean oil contract on the Dalian Commodity Exchange slid 0.7 percent and Chicago soyoil lost 0.4 percent.
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