Palm oil falls on weaker rival oils and concerns about rising production, stocks

Malaysian palm oils futures continued to fall on Monday as they tracked weaker rival edible oil prices. Concerns over increasing production and inventory levels were also a factor.

At midday, the benchmark palm oil contract on Bursa Derivatives Exchange for October delivery fell 31 ringgit or 0.73% to 4,242 Ringgit ($1,005.69) per metric ton.

David Ng, a proprietary trading at Kuala Lumpur's Iceberg X Sdn Bhd, explained that the price of crude palm oil fell during Asian hours due to the weakness of the Dalian market and the soyoil markets.

He said that "rising production and stock levels can also be seen as weighing on the market sentiment."

Dalian's palm oil contract, which is the most active contract in Dalian, fell by 0.89%. Chicago Board of Trade Soyoil Prices fell 0.32%.

As rival edible oils compete to gain a share in the global vegetable oil market, palm oil monitors the price movement of their competitors.

Oil prices increased after the U.S. struck a deal with Europe and could extend the tariff pause in China. This eases concerns that higher tariffs will limit economic activity and affect fuel demand.

Palm oil is a better option as a biodiesel feedstock because crude oil futures are stronger.

Exports of palm oil-based products from Malaysia for the period July 1-25 were estimated to be down between 9.2% and 15% compared to a month ago.

The palm ringgit (the currency of trade) remained unchanged in relation to the U.S. dollar.

Technical analyst Wang Tao stated that palm oil could test support at 4,211 Ringgit per metric tonne, and a break under this level would open the door to 4,161 Ringgit. ($1 = 4.2180 ringgit)

(source: Reuters)