KUALA LUMPUR: Malaysian palm oil futures slipped on Tuesday to a six-week closing low after a survey signalled that inventories swelled above 2 million tonnes, and further dragged down by weaker crude prices.

The benchmark palm oil contract for November delivery on the Bursa Malaysia Derivatives Exchange was down 117 ringgit, or 2.99%, at 3,799 ringgit ($844.60) a tonne by the midday break, its lowest closing since July 27.

Malaysia’s palm oil inventories at end-August jumped 14.5% to 2.03 million tonnes, the highest since April 2020, due to a rise in output, a Reuters survey showed on Monday.

Exports are seen 0.14% lower and are feared to remain weak as fresh COVID-19 lockdowns in several cities in China, a key palm oil buyer, fuelled concerns over demand and imports.

An extended export levy waiver in Indonesia, coupled with high export volumes, will boost exports from the world’s largest producer and potentially lead to weaker demand for Malaysian palm oil, Ivy Ng, regional head of plantations research at CGS-CIMB Research, said in a note.

In September, crude palm oil prices will be supported at current levels despite rising stocks due to a sharp discount against Malaysian palm olein and Argentinian soy oil, Ng said.

Palm slips for third day after survey pegs jump in inventories

Soyoil prices on the Chicago Board of Trade were down 2.2%. Dalian’s most-active soyoil contract rose 1.3%, while its palm oil contract edged 0.3% higher.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

Oil fell as concern returned about weaker demand and the prospect of more interest rate hikes, making palm a less attractive option for biodiesel feedstock.