Malaysian palm oil futures slumped to their lowest in 2012 on Thursday as the eurozone debt crisis and sluggish US growth triggered a flight of capital from riskier assets. "On the weekend ahead we are going to see the Greek election and market participants are staying away from the market for the time being," said Ker Chung Yang, commodities analyst with Phillip Futures in Singapore.
"Fundamentals remain quite encouraging, we have a higher demand and lower stocks. But fundamentals are not taking the front seat as macroeconomic factors are still dominating at the moment." Benchmark August palm oil futures on the Bursa Malaysia Derivatives Exchange lost 3.5 percent to close at 2,846 ringgit ($893) per tonne, the lowest level this year. Futures have lost more than 10 percent this year.
Prices also dropped below the 2,900-ringgit mark for the first time this year. The market hit a low of 2,838 ringgit earlier in the session, a level unseen since October 20, 2011. Traded volumes were high, at 37,755 lots of 25 tonnes each, compared to the usual 25,000 lots, as investors rushed to liquidate their positions.
Fundamentals were supportive, with Malaysian palm oil stocks hitting a 13-month low in May, a sign that strong demand was eating into stocks. Malaysian palm oil exports were lacklustre for June 1-10, but traders expect shipments to pick up as India and Pakistan restock ahead of the Muslim fasting month starting in mid-July.
Cargo surveyors will report export numbers for the first half of the month on Friday. In other vegetable oil markets, US soyoil for July delivery lost 1.1 percent. The most active January 2013 soyoil contract on the Dalian commodity exchange closed 2.1 percent lower, the biggest daily drop since May 15, reflecting volatility in the global markets.