Palm oil slips due to weaker rival oils and crude oil prices

The market for Malaysian palm oils futures continued to lose money for a third consecutive session on Tuesday as OPEC+'s plans to increase production and the weakness of rival edible oil weighed on it. However, the contract is still on course for a quarter gain.

At midday, the benchmark palm oil contract on Bursa Malaysia's Derivatives exchange for December delivery fell 38 ringgit or 0.87% to 4,347 Ringgit ($1,031.81) per metric ton.

This contract has gained 9.06% so far this quarter.

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 0.59% while soyoil prices dropped by 0.59%. Chicago Board of Trade soyoil prices were down by 0.2%.

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

The oil prices dropped as OPEC+ increased production and resumed exports of Iraqi Kurdistan via Turkey. This reinforced the view that a supply surplus was imminent.

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

Later in the afternoon, cargo surveyors will release their September export estimates.

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

The Malaysian Palm Oil Board has said that the palm oil stock in Malaysia is expected to decrease in the next few months. It will end the year with around 1.7 metric tons. This is due to a seasonal decline in production and an increase in exports in order to meet the festive season demand.

Technical analyst Wang Tao stated that palm oil could retest its support at 4,366 Ringgit per metric tonne. A break below this level would open the door to a range of 4,309 to 4,342 Ringgit.

(source: Reuters)