VEGOILS - Palm extends losses into third session due to weak demand and expectations of higher production

Malaysian palm oil futures reversing earlier gains, closed lower for the third consecutive session on Thursday. Pressured by a sluggish export demand, expectations of a higher output and weaker crude oi.

At the close, the benchmark palm oil contract on Bursa Malaysia's Derivatives exchange was down 38 Ringgit or 0.78% at 4,814 Ringgit ($1,194.54) per metric ton.

Anilkumar?Bagani, head of commodity research at Sunvin Group, explained that weaker exports, higher-than-expected production, and lower energy prices have caused 'palm oil' to trade at a premium compared with gas oil. It has also lost its competitiveness against soya oil.

Bagani said that recent rains could help support palm production in Malaysia, but there are growing concerns about potential 'production losses' next year because of fire hotspots on the island of Kalimantan in Indonesia.

He said that a moderate recovery in Chinese vegetable oils had helped the palm oil prices to rebound earlier on.

Dalian's palm oil contract, which is the most active contract, gained 0.06%. Chicago Board of Trade soyoil prices were down by 1.86%.

As it competes to gain a share in the global vegetable oil market, palm oil closely tracks the price fluctuations of rival edible oils. Cargo surveyors estimate that "exports of Malaysian Palm Oil products between August 1-25 decreased between?11.4% to?20% from a previous month." Oil prices continued to fall on Thursday as traders hoped that talks between Iran and Qatar would open the Strait of Hormuz, and thus reduce the supply disruptions caused by the Middle East war.

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

The ringgit (?palm's trade currency) fell 0.2% against the US dollar, making it slightly cheaper for buyers with foreign currencies.

(source: Reuters)