Malaysian palm oil futures fell over 1 percent on Thursday after three consecutive sessions of gains, on expectations of rising inventory levels and technical selling. The benchmark palm oil contract for December delivery on the Bursa Malaysia Derivatives Exchange was down 1.1 percent at 2,165 ringgit a tonne at the end of the trading day, its sharpest daily decline in a week.
Trading volumes stood at 38,540 lots of 25 tonnes each at the close of trade. "The market fell on technical selling as it wasn't able to break at a higher level," said a Kuala Lumpur based trader. "The market is also under pressure on rising stocks." Southeast Asia's palm oil stocks are set to hit record highs in October or November, according to planters, traders and analysts surveyed by Reuters, as storage tanks at ports and mills pile up with supplies.
Indonesian stocks are seen peaking at 5 million tonnes, while Malaysian inventories are forecast at close to 3 million tonnes. Palm stocks tend to peak towards the end of the calendar year and then decline due to a seasonal drop in production.
Crude palm oil prices are forecast to trend at $590 per tonne including cost, freight and insurance (CIF Rotterdam) by the end of the year on the back of firm demand from the biodiesel sector, said Julian McGill, head of Southeast Asia at commodities consultancy LMC International.
In other related oils, the Chicago September soyabean oil contract fell 0.1 percent, while the January soyabean oil contract on the Dalian Commodity Exchange gained 0.1 percent. Meanwhile, the Dalian January palm oil contract rose 0.2 percent. Palm oil prices are affected by movements of other edible oils, as they compete for a share in the global vegetable oils market.