June 11, 2014- Reuters
Malaysian palm oil futures slipped to a one-week low on Tuesday after an industry report showed stocks in the world’s second-largest producer hit a four-month high at the end of May, with sluggish demand adding pressure to prices. Industry regulator Malaysian Palm Oil Board reported Malaysian palm oil stocks rose 4.2 percent to 1.84 million tonnes in May, above market forecasts for 1.81 million tonnes, after a pick up in production offset overseas sales of the tropical commodity.
“The market reacted to the MPOB figure and sold down accordingly,” said a trader with a foreign commodities brokerage. “The report confirms the idea that the stocks will hit the 2-million-tonne mark by September.” Weakness in rival edible oil markets also weighed.
“The external sector is not holding the market. When they (investors) saw the Chinese and US soybean oil weakening, they took the opportunity to sell down further,” the Kuala Lumpur-based trader added.
The benchmark August contract on the Bursa Malaysia Derivatives Exchange had inched down 1.1 percent to 2,386 ringgit ($744) per tonne by Tuesday’s close, stretching its losses into a fourth straight session. Palm prices, down for a twelfth session out of 13, fell as much as to 2,376 ringgit in afternoon trade, a June 3 low. Total traded volume stood at 39,327 lots of 25 tonnes, above the usual 12,500 lots.
Technicals were also bearish. A rebound target at 2,446 ringgit per tonne has been aborted for palm oil, as it could have resumed its downtrend, said Reuters market analyst Wang Tao. The US soyoil contract for July lost 0.6 percent in late Asian trade, while the most active September soybean oil contract on the Dalian Commodities Exchange fell 0.7 percent. Losses in rival edible oil prices narrow palm’s discount and could channel demand away from the tropical oil.
Cargo surveyor Intertek Testing Services reported that exports of Malaysian palm oil products in the first ten days of June fell 0.3 percent to 390,729 tonnes compared with the same period a month ago, with shipments to India, China and Europe falling. Another cargo surveyor, Societe Generale de Surveillance, will release its own statistics on June 16.