Palm oil falls due to weak crude oil and rival oils but still shows a quarterly gain

The price of Malaysian palm oils futures dropped for a third consecutive session on Tuesday. This was due to the weakness of rival edible oils as well as OPEC+'s plans to increase production. However, this contract still recorded a gain in terms of its quarterly performance.

At the close, the benchmark palm oil contract on Bursa Malaysia's Derivatives exchange for December delivery fell 34 ringgit (0.78%) to 4,351 Ringgit ($1,034.47) per metric ton.

This quarter's contract has gained 9.16%, reversing the losses of the two previous quarters.

Palm oil was under pressure from the weakness of rival oilseeds. A Kuala Lumpur based trader reported that the bearish sentiment has continued across the vegetable oils complex as crude oil prices dropped sharply overnight after news of OPEC+'s plans to increase production.

The trader said that "Dalian palm oil also showed strong selling pressure in the run-up to China's National Day holiday and Mid-Autumn Festival from 1-8 October."

Dalian's palm oil contract, which is the most active contract, fell by 0.06%. Chicago Board of Trade soyoil prices were up by 0.02%.

As palm oil competes to gain a share in the global vegetable oil market, it tracks the price fluctuations of competing edible oils.

Oil prices dropped ahead of another expected production increase by OPEC+, and the resumption in oil exports via Turkey from Iraq's Kurdistan Region reinforced expectations of a surplus supply.

Palm oil is less appealing as a biodiesel feedstock due to the weaker crude oil futures.

Exports of palm oil-based products from Malaysia rose between 7.3% to 9.6% in September, according to cargo surveyors.

The palm ringgit's trade currency strengthened by 0.14% in relation to the dollar. This made the commodity slightly more expensive for buyers who hold foreign currencies.

The Malaysian Palm Oil Board has said that Malaysian palm oil stock is expected to decrease in the next few months. This will be due to a seasonal decline in production and an increase in exports in order to meet the festive season demand. ($1 = 4.2060 ringgit)

(source: Reuters)