VEGOILS - Palm oil drops by more than 3% on US-Iran truce
Malaysian palm oil futures fell more than 3% on Wednesday, due to a sharp fall in crude oil prices following a U.S.-Iran ceasefire deal.
By the lunch break, the benchmark palm oil contract for June delivery at the Bursa Derivatives Exchange had fallen 150 ringgit or 3.15% to 4,615 Ringgit ($1,159.55). This was the third consecutive session of losses.
Sandeep Singh of The Farm Trade, Kuala Lumpur's consulting and trading firm, says that palm oil prices closely track developments in the Middle East conflict.
The two-week Middle East truce sparked relief rallies, with hopes that oil and gas flow through the Strait of Hormuz would resume.
Weaker crude futures make palm a less appealing option as a biodiesel feedstock.
Singh said that palm oil prices are expected to stabilize at around 4,500 ringgits, backed by a potential B20 mandate in Malaysia as well as lower inventories.
Malaysia will expand its palm-based B20 Biodiesel Programme nationwide in phases. This is to take into consideration the price sensitivity between palm oil and petroleum prices.
Dalian's palm oil contract fell by 3.76%, while the most active soyoil contract dropped 2.73%. Prices for soyoil on the Chicago Board of Trade fell by 3.63%.
As palm oil competes to gain a market share in the global vegetable oils market, it tracks the price movement of its rival edible oils.
The palm ringgit's currency has strengthened by 1.19% in relation to the dollar. This makes the commodity more expensive for buyers who hold foreign currencies.
Technical analyst Wang Tao stated that Palm?oil could revisit its recent low of 4,713 Ringgit per ton. This would be the end of a wave starting at 4,919 Ringgit.
(source: Reuters)
