Palm snaps its two-day winning streak as rising production and stocks weigh on it

The Malaysian palm futures market ended a two-day streak of gains on Wednesday. This was due to rising production and inventory levels, which weighed heavily on the market. However, stronger edible oils from other countries and positive export data helped limit the decline.

The benchmark contract for palm oil delivery in August on the Bursa Derivatives exchange fell 12 ringgit or 0.31% to 3,896 Ringgit ($913.05), a metric tonne, at the close.

A Kuala Lumpur based trader stated that crude palm oil futures were higher in the morning session because of the strength on the oilseeds rival market and the positive export data.

The trader said that the rising stock and production levels had capped prices.

Dalian's palm oil contract, which is the most active contract, also rose by 0.35%. Chicago Board of Trade soyoil prices rose 1.13%.

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

Exports of palm oil products from Malaysia between May 1-20 increased by 1.6% to 5.3% compared to the same period last month.

Palm's currency, the ringgit, has strengthened by 0.65% versus the U.S. Dollar, increasing the price of the commodity for buyers with foreign currencies.

Reports that Israel may be preparing an attack on Iranian nuclear facilities triggered fears of a Middle East supply disruption.

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

The Malaysian Palm Oil Council stated that the price of crude palm oil is expected to fluctuate between 3,750-4000 ringgits in May, before recovering gradually amid the volatility on the vegetable oil markets and energy markets. ($1 = 4.2670 ringgit)

(source: Reuters)