Palm oil falls

Malaysian palm oil futures dropped on Thursday for a second consecutive session, tracking falls in competing overseas oils and as fresh rains reduced concerns over slowing output. The palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange closed nearly 1 percent down at 2,674 ringgit ($664) a tonne. Traded volumes were 46,085 lots of 25 tonnes each in the evening, versus a 2015 daily average of 44,600 lots.
"The market was heavily overbought, so there should be corrections around the 2,600-2,700 ringgit level. We also saw recent rains in Kuala Lumpur and other places," a Kuala Lumpur-based trader said. Palm oil rose in the four sessions through Tuesday to a two-year high on fears that an El Nino weather pattern would damage fresh fruit yields and lower production.
Rains across Malaysia, the world's second-largest palm producer, could lessen the impact of El Nino, a dry weather phenomenon that brings scorching heat across Southeast Asia. However, official data on February crude palm oil output in Indonesia, the world's top palm producer, is expected to show further declines from January because of droughts and forest fires, a Reuters survey showed.
Crude palm oil production could have dropped to 2.30 million tonnes in February, according to the median estimate in a survey of two industry associations and one of the country's largest planters. That is down from 2.44 million tonnes in January and the lowest since February 2015. Palm oil is expected to fall to a support at 2,645 ringgit a tonne, as suggested by a Fibonacci projection analysis, said Wang Tao, Reuters market analyst for commodities and energy technicals.
In competing vegetable oil markets, the September soybean oil contract on the Dalian Commodity Exchange fell 2 percent and the May Chicago Board of Trade soyoil contract lost 0.6 percent. Crude palm kernel oil's offer price stood at 5142.26 ringgit a tonne at the midday break, falling for a second day after touching a four-year high on Tuesday, according to price assessments by Thomson Reuters. "I don't think such high levels can be sustained. Prices should correct themselves in a month's time," one trader said.