Palm oil prices continue to fall due to weak demand

Malaysian palm oil futures declined on Tuesday, after rising the previous session. This was due to a sluggish demand for exports that continues to weigh on the market.

By midday, the benchmark palm oil contract for August delivery at the Bursa Derivatives exchange was down 77 Ringgit or 1.68% to 4,498 Ringgit ($1,107.34).

Paramalingam Supramaniam is a director at brokerage Pelindung Bestari. He said that the market was still on edge. It's caught between a weak demand and a slight recovery in June production.

The palm currency, the ringgit (RMB), strengthened by 0.27% on Tuesday against the US dollar after falling to its lowest point since January 13, in the previous session. The weaker ringgit can provide some relief but cannot be a shock absorber in the long run, he said. "A genuine demand for palm oil must be present before the market enters the peak production months of the third quarter." Cargo surveyors estimate that the exports of Malaysian products containing palm oil for May decreased between 8.8% to 15.5% compared to a month ago. Malaysian Palm Oil Board will release its monthly data on supply and demand on Wednesday.

Dalian's palm oil contract, which is the most active contract, fell by 1.27%. Chicago Board of Trade soyoil prices were down by 0.63%.

Palm oil follows the price movement of rival edible oils as it competes to gain a share in the "global vegetable oils" market. After Iran and Israel announced that they had stopped attacking each other after an appeal by U.S. President Donald Trump, oil prices dropped, wiping out most of the previous sessions gains. Both sides warned, however, that they could resume hostilities.

Palm oil is less attractive as a biodiesel source due to weaker crude oil futures. Technical analyst Wang Tao believes that palm?oil could retest the resistance level of?4,613 per metric ton as a bounce from support at 4,538 ringsgit seems incomplete.

(source: Reuters)