Malaysian palm oil futures eased to a one-week low on Friday, as uncertainty clouding the global economic outlook offset expectations of improving demand for the vegetable oil. The benchmark November contract on the Bursa Malaysia Derivatives Exchange ended down 0.8 percent at 3,003 Malaysian ringgit ($1,005) per tonne. It earlier hit a low of 2,990 ringgit, the lowest since Aug. 11.
Prices were down 0.4 percent for the week. Traded volumes for the contract were at 9,358 lots of 25 tonnes each, compared to 11,513 lots on Thursday. "The market is down a bit on the back of equities and eurozone problems," said a Kuala Lumpur-based trader. "Our local sentiment is quite strong - there is strong demand." An ugly sell-off in global stocks gathered pace on Friday, on mounting concerns the US economy is heading into another recession and as some European lenders faced a short-term funding crunch, highlighting the risk of a banking crisis.
In related markets, Brent crude fell towards $106, extending the previous session's plunge after weak economic data added to expectations the world would head back into recession and oil demand could shrink. In other vegetable oils, US soybeans for November delivery fell, while the most active May 2012 soyoil on China's Dalian Commodity Exchange touched a near one-week low.
"China's soyoil trade is tracking weak external markets with additional pressure coming from the news saying that China is likely to auction 4 million tonnes of soybeans reserves," said an oil analyst in Shanghai. Palm oil's bullish fundamentals remain intact despite external factors. Earlier this week, Malaysian palm oil exports for the first 15 days of August rose more than a fifth and traders expect the trend to continue. Malaysia is the world's second largest palm oil producer. Analysts say output is likely to fall in the coming weeks, as estate workers take extended leave for the Muslim fasting observance of Ramazan, which will end with Eid celebrations in late-August.