Malaysian palm oil slipped to a near three-week low on Tuesday as technical selling and weak comparative markets weighed on prices, while investors positioned themselves ahead of a flurry of data due at the end of the week. The benchmark August crude palm oil contract on the Bursa Malaysia Derivatives Exchange closed 1 percent lower, at 3,354 Malaysian ringgit ($1,116) a tonne. Prices earlier fell to 3,343 ringgit - its lowest level since May 19.
Overall traded volume stood at 11,972 lots of 25 tonnes each, versus a total of 9,549 lots on Monday. "The market is still getting used to improved output," said one palm oil dealer. "Production is going to be a couple of digits (higher) in May, so you would expect stock to be close to 1.9 million (tonnes)." "The market is expecting a rather negative MPOB report on Friday," he added. "But I'd expect the export number to be quite encouraging."
On a packed data calendar this week, the Malaysian Palm Oil Board is due to release stocks, export and production numbers on Friday. Malaysian palm oil stocks likely soared to a 16-month high in May as strong production growth overtook a modest increase in exports, a Reuters survey showed on Monday.
Another trader said that a support level was at 3,320 ringgit, as investors awaited key stock and production data from Malaysia, the world's second biggest producer, later this week. Also on Friday, Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance are scheduled to issue June 1-10 palm oil export numbers. Before Friday, however, the US Department of Agriculture will release its June supply-demand report on Thursday.
The most-active January 2012 soyoil contract on Dalian dipped about 1 percent, as Chinese markets re-opened after a public holiday on Monday. Palm oil traders are also watching for any possible interest rate hikes in China, which could hit imports. ICDX's August CPO futures contract ended at 9,735 rupiah per kg, compared to 9,855 rupiah per kg when it opened. Market volume was 1,494 lots of 10 tonnes each.
"It's down because we do expect production to increase substantially," said a palm oil analyst, when asked about his second half outlook. "On top of that, there is a risk that the Indonesian government is going to lower the export tax which would increase the supply into the export market."