Key Takeaways
- Malaysian palm oil futures fell more than 1% on Thursday.
- Weakness in soyoil prices and bearish MPOB data pressured the market.
- Malaysia's palm oil inventories hit an eight-month high in August.
Malaysian palm oil futures declined by more than 1% on Thursday, marking a third consecutive session of losses. The benchmark palm oil contract for November delivery on the Bursa Malaysia Derivatives Exchange dropped 81 ringgit, or 1.63%, to 4,885 ringgit ($1,202.61) a metric ton at the close.
The market's downward trend was primarily attributed to weaker soybean oil prices, according to David Ng, a proprietary trader at Kuala Lumpur-based trading firm Iceberg X Sdn Bhd. Ng noted that the Malaysian Palm Oil Board’s (MPOB) data was also bearish, with stocks climbing higher than expected month-on-month.
The sluggish pace of exports combined with higher production growth led to a stock buildup, according to MPOB data. In August, Malaysia's palm oil inventories reached an eight-month high, with production increasing to the highest level since December. Exports, however, declined.
Cargo surveyors estimated that Malaysian palm oil product exports for September 1-10 fell between 11.7% and 17.5% from the previous month. This further contributed to the downward pressure on palm oil prices.
Despite the decline, stronger crude oil futures made palm a more attractive option for biodiesel feedstock. Dalian's most-active soyoil contract fell 0.64%, while its palm oil contract shed 1.37%. Soyoil prices on the Chicago Board of Trade were down 0.55%.
The ringgit, the currency of trade for palm oil, strengthened 0.17% against the dollar, making the commodity slightly more expensive for buyers holding foreign currencies.
Traders are bracing for deeper supply disruptions after Iran and the United States launched their largest attacks on shipping since their six-month-old conflict began. This could potentially support palm oil prices in the long term as it makes palm a more attractive option for biodiesel feedstock.
The Malaysian palm oil market remains closely tied to the global vegetable oils market, with palm oil tracking the price movements of its rivals. As such, any changes in the global edible oils market can significantly impact the price of palm oil.
The sluggish pace of exports combined with higher output growth is the main reason leading to the stock buildup.
David Ng, Proprietary trader at Iceberg X Sdn Bhd
