Palm slips due to firmer ringgit and weak crude oil, Chicago soyoil
Malaysian palm futures declined on Monday, continuing to decline for a fifth consecutive session. Pressured by the persistent strength of the ringgit and lower Chicago soyoil, and crude, they fell.
By midday, the benchmark palm oil contract on Bursa Malaysia's Derivatives exchange for July delivery had fallen 93 ringgit or 2.4% to $3,788 ringgit (US$902.33) per metric ton.
The strengthening of the ringgit has eroded the competitiveness of Malaysian Palm Oil, putting immediate downward pressure on its prices, said Darren Lim. Commodities strategist at Singapore-based Phillip Nova.
The market is also weighed down with expectations of an increase in production and inventory in the coming months.
Lim stated that the continued decline in crude oil has further dampened the appeal for palm and other vegetable oils to be used as feedstocks for biodiesel. These factors are creating a negative undertone on the market.
A survey found that Malaysian palm oil inventories rose for the second month in a row in April as the industry approached peak production. The second half of the calendar year is expected to see significant increases in output, the study showed.
Early Asian trading saw oil prices fall by more than two dollars a barrel after OPEC+ announced plans to increase output. This sparked concerns over more supply.
Palm oil is less appealing as a biodiesel feedstock due to the weaker crude oil futures.
The palm ringgit's currency has strengthened by 1.41% compared to the U.S. Dollar, increasing the price of the commodity for buyers who hold foreign currencies.
Chicago Board of Trade Soyoil fell by 2.14%. Dalian Commodity Exchange will be closed for Labour Day from May 1 to 5.
As palm oil competes to gain a share in the global vegetable oil market, it tracks the prices of competing edible oils.
According to Wang Tao, a technical analyst, the price of palm oil could rise to 3,951 Ringgit per metric tonne, since the market has stabilized at 3,828 Ringgit.
(source: Reuters)
