Palm oil production drops due to concerns about stocks and output. Second weekly loss expected.

Malaysian palm futures fell on Friday, erasing gains made in the first session, as expectations of higher production and inventories in the coming weeks weighed.

At midday, the benchmark palm oil contract on Bursa Derivatives Exchange for July delivery fell 12 ringgit or 0.32% to 3,789 Ringgit ($878.10) per metric ton.

The contract is on track to record a second weekly decline after losing 1.19% this week.

Concerns over the rising production and stock levels in the coming week weighed heavily on the market sentiment. David Ng is a proprietary trader with Kuala Lumpur based trading firm Iceberg X Sdn. Bhd.

As the palm oil industry nears its peak production season in the second half, it is expected that the output will increase significantly.

On May 13, the Malaysian Palm Oil Board is releasing its monthly data on supply and demand.

Dalian's palm oil contract also rose by 0.48%. Chicago Board of Trade Soyoil Prices declined by 0.25%.

As palm oil competes to gain a share in the global vegetable oils industry, it tracks the prices for rival edible oils.

The palm ringgit's trade currency, the dollar, fell by 0.89%, making the commodity more affordable for buyers who hold foreign currencies.

Oil prices were little altered after rising by more than 3% Thursday as tensions between the U.S., China and other major oil consumers showed signs of easing. Britain also announced a "breakthrough deal" with the U.S.

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

Technical analyst Wang Tao stated that palm oil could bounce further into the range of 3,867-3,906 Ringgit per metric tonne as it has stabilised around support at 3,702 Ringgit.

(source: Reuters)