Palm eases due to rising stocks; expected weekly loss
On Friday, Malaysian palm oil futures declined, wiping out earlier gains and adding to the weekly loss. This was due to rising stocks, but concerns about future supply constraints helped cushion the decline.
By midday, the benchmark contract for?palm?oil delivery in November on the Bursa Derivatives exchange was down 11 Ringgit or 0.23% at 4,874 Ringgit ($1,197.54) per metric ton.
This week, the contract is down 1.12% after a 0.72% increase last week.
Data from the industry regulator shows that Malaysian palm oil inventories reached an eight-month peak in August, as production increased to its highest level since December while exports decreased.
A CIMB Securities report stated that the larger-than expected inventory build reflects a growing imbalance between seasonal production recovering and softer export demands.
The report said that "the?higher level of stock could cap the near-term crude oil price upwards, but?downsides may still be cushioned?if bio tree stress continues limiting production growth."
It noted that the production is likely to remain seasonal in the months ahead, but a significant recovery in exports is important to avoid inventories rising any further.
Exports of Malaysian Palm Oil Products?for the period September 1 to October fell between 11.7% and 175% from one month earlier, according to cargo surveyors.
Both major benchmarks are on track to finish the week at or above $100 per barrel, for the first time since mid-May. This is due to increased attacks along the Middle East's key shipping routes fueling fears of a long-term disruption in supplies.
Palm oil is a better option as a biodiesel feedstock because crude oil futures are stronger.
Dalian's soyoil contract that was most active rose by 0.44% while palm oil contracts fell by 0.79%. The Chicago Board of Trade's Soyoil prices were down by 0.43%.
Palm oil tracks the price movement of competing edible oils as it competes to gain a share in the global vegetable oils markets.
(source: Reuters)
