MARKET DEVELOPMENT
VEGOILS-Palm Oil Dips to 2-Month Low on Rising Stocks, Sluggish Exports
VEGOILS-Palm Oil Dips to 2-Month Low on Rising Stocks, Sluggish Exports
14/01/2014 (Reuters) - Malaysian palm oil futures fell to their lowest in more than two months on Monday, stretching their losing streak to an eighth session as concerns about higher stocks amid sluggish export demand weighed on investor sentiment.
Malaysian end-stocks rose to 1.99 million tonnes in December from a month earlier, the Malaysian Palm Oil Board said on Friday, hitting their highest in nine months as lacklustre demand offset a fall in output caused by monsoon floods.
Market players had expected inventories to fall to 1.96 million tonnes.
The benchmark March contract on the Bursa Malaysia Derivatives Exchange shed 0.9 percent to 2,494 ringgit ($765) per tonne by Monday's close. Prices had dropped to 2,486 ringgit in the afternoon session, their lowest since Oct. 29.
"There's no incentive for prices to move higher. They are still stuck in a range - trading between 2,480 and 2,550 ringgit," said a Malaysia-based trader with a foreign commodities brokerage.
Total traded volume on Monday stood at 31,004 lots of 25 tonnes, smaller than the usual 35,000 lots.
Weaker-than-expected exports in the Jan. 1-10 period also dragged on benchmark prices. Cargo surveyors reported that Malaysian palm exports plunged 22 percent from a month ago as crude palm oil shipments slowed and buyers from India, Europe and Pakistan cut back purchases.
"This suggests that the narrowing discount of crude palm oil compared to soybean oil and crude oil has eroded the competitiveness of palm oil in the global market," said CIMB analyst Ivy Ng in a note.
"We project exports to be weaker month-on-month in January, which is in line with the seasonal downturn in production," Ng added.
A stronger ringgit also curbed buying interest from overseas buyers and refiners. The Malaysian ringgit hit a near four-week peak on Monday, rising 0.28 percent to 3.2595 against the dollar and making the ringgit-priced feedstock more expensive.
Analysts said lower Malaysian imports of palm oil from neighbouring Indonesia signalled that the top producer is serious in carrying out its new policy of requiring a higher percentage of palm oil in its biodiesel blend, and will support prices in the long term.
"Note that in December 2013, Malaysia's palm oil imports from Indonesia remained very low at 24,574 metric tonnes, or 72 percent lower year-on-year," said Alan Lim, analyst with Kenanga Investment Bank.
"We reckon that this is a sign that Indonesia is committed to implementing its biodiesel plan, which spurred higher domestic palm oil usage, thus curbing its export and lessening the export competition with Malaysia," Lim said. "In the long run, this is positive to crude palm prices and benefits both countries."
Technicals showed Malaysian palm oil is expected to rebound to 2,555 ringgit per tonne as it has completed a five-wave cycle, Reuters market analyst Wang Tao said.
In other markets, oil fell below $107 a barrel on Monday after six major powers struck a fresh six-month deal with Iran to curb its nuclear programme.
In competing vegetable oil markets, the U.S. soyoil contract for March fell 0.2 percent in late Asian trade. The most active May soybean oil contract on the Dalian Commodities Exchange dropped 0.5 percent.
Palm, soy and crude oil prices at 1013 GMT
Contract Month Last Change Low High Volume
MY PALM OIL JAN4 0 +0.00 0 0 0
MY PALM OIL FEB4 2472 -27.00 2465 2510 2759
MY PALM OIL MAR4 2494 -23.00 2486 2531 13914
CHINA PALM OLEIN MAY4 5828 -24.00 5788 5874 623502
CHINA SOYOIL MAY4 6626 -36.00 6608 6688 487360
CBOT SOY OIL MAR4 38.17 -0.06 38.01 38.23 4781
NYMEX CRUDE FEB4 92.26 -0.46 92.11 92.88 13290
Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in U.S. cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
Crude in U.S. dollars per barrel
($1=3.26 Malaysian ringgit)
Malaysian end-stocks rose to 1.99 million tonnes in December from a month earlier, the Malaysian Palm Oil Board said on Friday, hitting their highest in nine months as lacklustre demand offset a fall in output caused by monsoon floods.
Market players had expected inventories to fall to 1.96 million tonnes.
The benchmark March contract on the Bursa Malaysia Derivatives Exchange shed 0.9 percent to 2,494 ringgit ($765) per tonne by Monday's close. Prices had dropped to 2,486 ringgit in the afternoon session, their lowest since Oct. 29.
"There's no incentive for prices to move higher. They are still stuck in a range - trading between 2,480 and 2,550 ringgit," said a Malaysia-based trader with a foreign commodities brokerage.
Total traded volume on Monday stood at 31,004 lots of 25 tonnes, smaller than the usual 35,000 lots.
Weaker-than-expected exports in the Jan. 1-10 period also dragged on benchmark prices. Cargo surveyors reported that Malaysian palm exports plunged 22 percent from a month ago as crude palm oil shipments slowed and buyers from India, Europe and Pakistan cut back purchases.
"This suggests that the narrowing discount of crude palm oil compared to soybean oil and crude oil has eroded the competitiveness of palm oil in the global market," said CIMB analyst Ivy Ng in a note.
"We project exports to be weaker month-on-month in January, which is in line with the seasonal downturn in production," Ng added.
A stronger ringgit also curbed buying interest from overseas buyers and refiners. The Malaysian ringgit hit a near four-week peak on Monday, rising 0.28 percent to 3.2595 against the dollar and making the ringgit-priced feedstock more expensive.
Analysts said lower Malaysian imports of palm oil from neighbouring Indonesia signalled that the top producer is serious in carrying out its new policy of requiring a higher percentage of palm oil in its biodiesel blend, and will support prices in the long term.
"Note that in December 2013, Malaysia's palm oil imports from Indonesia remained very low at 24,574 metric tonnes, or 72 percent lower year-on-year," said Alan Lim, analyst with Kenanga Investment Bank.
"We reckon that this is a sign that Indonesia is committed to implementing its biodiesel plan, which spurred higher domestic palm oil usage, thus curbing its export and lessening the export competition with Malaysia," Lim said. "In the long run, this is positive to crude palm prices and benefits both countries."
Technicals showed Malaysian palm oil is expected to rebound to 2,555 ringgit per tonne as it has completed a five-wave cycle, Reuters market analyst Wang Tao said.
In other markets, oil fell below $107 a barrel on Monday after six major powers struck a fresh six-month deal with Iran to curb its nuclear programme.
In competing vegetable oil markets, the U.S. soyoil contract for March fell 0.2 percent in late Asian trade. The most active May soybean oil contract on the Dalian Commodities Exchange dropped 0.5 percent.
Palm, soy and crude oil prices at 1013 GMT
Contract Month Last Change Low High Volume
MY PALM OIL JAN4 0 +0.00 0 0 0
MY PALM OIL FEB4 2472 -27.00 2465 2510 2759
MY PALM OIL MAR4 2494 -23.00 2486 2531 13914
CHINA PALM OLEIN MAY4 5828 -24.00 5788 5874 623502
CHINA SOYOIL MAY4 6626 -36.00 6608 6688 487360
CBOT SOY OIL MAR4 38.17 -0.06 38.01 38.23 4781
NYMEX CRUDE FEB4 92.26 -0.46 92.11 92.88 13290
Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in U.S. cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
Crude in U.S. dollars per barrel
($1=3.26 Malaysian ringgit)