Malaysian palm oil futures dropped for a fourth straight session on Tuesday to hit their lowest level in more than two weeks, after data from a palm millers' body showed an unexpected rise in production. The palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange fell 0.6 percent to 2,551 ringgit at the close of trade, after hitting 2,542 ringgit, its lowest since February 5, earlier in the session.
Traded volume stood at 48,314 lots of 25 tonnes each. "Palm continued (its fall) on technical selling on yesterday's weak closing," said a Kuala Lumpur-based trader with a brokerage firm, blaming the surprise gain in output for the fall.
The Southern Palm Oil Millers' Association released data on Tuesday that showed output up 2.6 percent between February 1 and February 20 compared with the same period in January. Output of the vegetable oil is likely to drop in February due to seasonal trends and the dry weather effects of the El Nino, an industry analyst said earlier.
Industry experts have also forecast growth in global palm oil production to slow this year, but recent rainfall could mute the impact of the El Nino weather pattern which brings crop-damaging dry weather across Southeast Asia. Palm stockpiles have been falling since they reached a record high of nearly 3 million tonnes in November, lending support to benchmark palm oil prices. A stronger ringgit also weighed on sentiment. The Malaysian currency strengthened against the dollar on Tuesday, hitting a high of 4.1680 in early trade, before snapping some of the gains later.
A stronger ringgit makes palm oil more expensive for holders of foreign currencies. Palm oil is expected to slide to 2,506 ringgit per tonne, as suggested by a rising channel and a Fibonacci projection analysis, according to Reuters market analyst for commodities and energy technicals Wang Tao. In competing vegetable oil markets, the May soybean oil contract on the Dalian Commodity Exchange lost 0.6 percent, while the Chicago soyoil contract fell 0.8 percent.
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