Palm oil tumbles
December 05, 2012
Malaysian palm oil futures fell to its lowest in more than three weeks on Tuesday as investors fret over the prospects of another month of record stocks in the world’s No 2 producer. Spot December contract was trading at a 8 percent discount to the benchmark February futures, signalling oversupply and keeping investors on edge although seasonally slowing output and Chinese demand should curb stockpiles.
Record high stocks in Indonesia and Malaysia will see palm oil futures post their worst annual performance since the financial crisis in 2008. Palm oil prices have lost nearly 28 percent so far this year also on the deepening euro zone debt crisis affecting global economic growth.
“There is plentiful stock around – that’s the reason why the market is still technically weak. The local front is bearish,” said a trader with a foreign commodities brokerage. The benchmark February contract on the Bursa Malaysia Derivatives Exchange fell as much as 2,279 ringgit per tonne, the lowest since November 12, before closing at 2,298 ringgit ($756) per tonne.
Total traded volumes surged to 42,981 lots of 25 tonnes each, nearly doubling from the usual 25,000 lots. Technicals showed that palm oil would revisit its November 12 low of 2,220 ringgit per tonne, said Reuters market analyst Wang Tao. Malaysian crude palm oil exports are expected to rise in the next few weeks thanks to stronger demand from China ahead of Lunar New Year celebrations in February, and stricter import rules next year.
“We have assumed crude palm oil exports to increase by 5 percent to 1.85 million tonnes in November as Chinese traders are expected to stock up,” Kenanga Investment Bank analyst Alan Lim said in a note to clients. In palm oil’s competing markets, US soyoil for December delivery edged up 0.2 percent. The most active May 2013 soybean oil contract on the Dalian Commodity Exchange rose 0.1 percent.