Palm oil prices fall on the back of expectations for higher production and stock levels

After two sessions of gains in a row, the price of palm oil futures for Malaysia dipped on Tuesday as expectations of increased production and inventories put pressure on the market.

At midday, the benchmark contract for palm oil delivery in August on the Bursa Derivatives exchange fell 27 ringgit (0.7%), to 3,806 Ringgit ($903.61) per metric ton.

A Kuala Lumpur based trader stated that prices are lower due to increased stock, while production will be the same as last month.

Buyers are expecting lower prices due to the current export numbers and the possibility that stocks will rise. Chicago soyoil has also dropped from its highs, and Dalian does not show any signs of strength," said the trader.

On June 10, the Malaysian Palm Oil Board will release its monthly data on supply and demand.

Exports of Malaysian Palm Oil Products between May 1-25 grew between 7.3% to 11.6% compared with a similar period last month, according to cargo surveyors.

Dalian's soyoil contract, which is the most active contract in Dalian, fell by a mere 0.08% while palm oil rose by 0.3%. Chicago Board of Trade soyoil prices climbed 0.08%.

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

The oil prices fell as participants on the market weighed up the possibility that OPEC+ would decide to increase crude oil production at a meeting scheduled for later this week.

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

The palm ringgit's trade currency, the dollar, has weakened by 0.05%, making it slightly cheaper for foreign buyers.

Technical analyst Wang Tao stated that palm oil could test resistance at 3,863 Ringgit. A break above this level would lead to gains in the range of 3,892-3,911 Ringgit. ($1 = 4.2120 ringgit)

(source: Reuters)