MARKET DEVELOPMENT
VEGOILS-Palm Oil Slides to Near 8-Month Low on Rising Supply Fears
VEGOILS-Palm Oil Slides to Near 8-Month Low on Rising Supply Fears
12/06/2014 (Reuters) - Malaysian palm oil futures slid to a near eight-month low on Wednesday as worries over rising edible oil supplies amid lagging demand weighed, although expectations of a potential El Nino hitting crops curbed losses.
Industry data released on Tuesday showed that palm oil stocks in Malaysia, the world's second-largest producer, rose to a four-month high of 1.84 million tonnes at the end of May, after a pick-up in output outstripped exports of the tropical oil.
"The anticipation of rising stocks and bumper U.S soybean harvest may continue to dampen near-term CPO prices," said CIMB Investment Bank analyst Ivy Ng, adding that palm end-stocks will likely rise to 1.93 million tonnes in June.
"However, the rising supply risks due to the Q1 2014 drought and potential El Nino, increasing crude oil prices and biodiesel mandate are expected to support CPO prices at current levels," added Ng, who sees prices trading between 2,300-2,600 ringgit this month.
The benchmark August contract on the Bursa Malaysia Derivatives Exchange stretched its losing streak into a fifth day to fall to 2,364 ringgit late Wednesday, its lowest since Oct. 14, before settling at 2,379 ringgit ($741) per tonne by the close, down 0.3 percent.
Total traded volume stood at only 27,662 lots of 25 tonnes compared with the usual 35,000 lots.
Technicals showed palm oil is expected to drop to a support at 2,341 ringgit per tonne, a break below which will lead to a further loss towards 2,260 ringgit, said Reuters market analyst Wang Tao.
Market players and analysts say that while palm inventories will likely keep rising in coming months, export demand could turn sluggish as buyers complete restocking activities for a Muslim festival that begins at end-June.
Exports of Malaysian palm products slipped 0.3 percent between June 1-10 compared to a month ago, data from cargo surveyor Intertek Testing Services showed on Tuesday.
"We expect flat export growth as the completion of restocking activity for Ramadan may cause a temporary slowdown in demand from India and Pakistan," said Kenanga Investment Bank analyst Alan Lim in Kuala Lumpur.
"However, this is neutralised by better demand seen from the northern hemisphere (China and Europe) due to warmer weather there."
But palm prices, which are down more than 10 percent this year, may get a respite if the El Nino weather pattern returns for the first time in five years to bring severe dry weather to Southeast Asia -- where most of the world's oil palm is cultivated.
Japan's weather bureau said on Tuesday that the emergence of the El Nino weather pattern is getting closer, and reiterated that one could emerge this summer and last at least until autumn.
"We gather that El Nino may occur as soon as two months from now... we believe that the market will take the El Nino warning from scientists seriously and this should be supportive to CPO prices," Lim added.
In other markets, oil futures rose above $110 a barrel on Wednesday as violence in Iraq prompted worries about the supply outlook, while a fall in U.S. stockpiles of gasoline pointed to seasonally stronger demand.
In other competing vegetable oil markets, the U.S. soyoil contract for July lost 0.2 percent in late Asian trade, while the most active September soybean oil contract on the Dalian Commodities Exchange shed 0.8 percent.
Palm, soy and crude oil prices at 1012 GMT
Contract Month Last Change Low High Volume
MY PALM OIL JUN4 2385 -1.00 2385 2385 10
MY PALM OIL JUL4 2384 -8.00 2370 2387 779
MY PALM OIL AUG4 2379 -6.00 2364 2384 13370
CHINA PALM OLEIN SEP4 5780 -72.00 5770 5848 249138
CHINA SOYOIL SEP4 6670 -52.00 6658 6710 217806
CBOT SOY OIL JUL4 38.85 -0.09 38.75 39.05 4317
NYMEX CRUDE JUL4 104.64 +0.29 104.25 104.79 10461
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 = 3.2100 Malaysian ringgit)
($1 = 6.2279 Chinese yuan)
Industry data released on Tuesday showed that palm oil stocks in Malaysia, the world's second-largest producer, rose to a four-month high of 1.84 million tonnes at the end of May, after a pick-up in output outstripped exports of the tropical oil.
"The anticipation of rising stocks and bumper U.S soybean harvest may continue to dampen near-term CPO prices," said CIMB Investment Bank analyst Ivy Ng, adding that palm end-stocks will likely rise to 1.93 million tonnes in June.
"However, the rising supply risks due to the Q1 2014 drought and potential El Nino, increasing crude oil prices and biodiesel mandate are expected to support CPO prices at current levels," added Ng, who sees prices trading between 2,300-2,600 ringgit this month.
The benchmark August contract on the Bursa Malaysia Derivatives Exchange stretched its losing streak into a fifth day to fall to 2,364 ringgit late Wednesday, its lowest since Oct. 14, before settling at 2,379 ringgit ($741) per tonne by the close, down 0.3 percent.
Total traded volume stood at only 27,662 lots of 25 tonnes compared with the usual 35,000 lots.
Technicals showed palm oil is expected to drop to a support at 2,341 ringgit per tonne, a break below which will lead to a further loss towards 2,260 ringgit, said Reuters market analyst Wang Tao.
Market players and analysts say that while palm inventories will likely keep rising in coming months, export demand could turn sluggish as buyers complete restocking activities for a Muslim festival that begins at end-June.
Exports of Malaysian palm products slipped 0.3 percent between June 1-10 compared to a month ago, data from cargo surveyor Intertek Testing Services showed on Tuesday.
"We expect flat export growth as the completion of restocking activity for Ramadan may cause a temporary slowdown in demand from India and Pakistan," said Kenanga Investment Bank analyst Alan Lim in Kuala Lumpur.
"However, this is neutralised by better demand seen from the northern hemisphere (China and Europe) due to warmer weather there."
But palm prices, which are down more than 10 percent this year, may get a respite if the El Nino weather pattern returns for the first time in five years to bring severe dry weather to Southeast Asia -- where most of the world's oil palm is cultivated.
Japan's weather bureau said on Tuesday that the emergence of the El Nino weather pattern is getting closer, and reiterated that one could emerge this summer and last at least until autumn.
"We gather that El Nino may occur as soon as two months from now... we believe that the market will take the El Nino warning from scientists seriously and this should be supportive to CPO prices," Lim added.
In other markets, oil futures rose above $110 a barrel on Wednesday as violence in Iraq prompted worries about the supply outlook, while a fall in U.S. stockpiles of gasoline pointed to seasonally stronger demand.
In other competing vegetable oil markets, the U.S. soyoil contract for July lost 0.2 percent in late Asian trade, while the most active September soybean oil contract on the Dalian Commodities Exchange shed 0.8 percent.
Palm, soy and crude oil prices at 1012 GMT
Contract Month Last Change Low High Volume
MY PALM OIL JUN4 2385 -1.00 2385 2385 10
MY PALM OIL JUL4 2384 -8.00 2370 2387 779
MY PALM OIL AUG4 2379 -6.00 2364 2384 13370
CHINA PALM OLEIN SEP4 5780 -72.00 5770 5848 249138
CHINA SOYOIL SEP4 6670 -52.00 6658 6710 217806
CBOT SOY OIL JUL4 38.85 -0.09 38.75 39.05 4317
NYMEX CRUDE JUL4 104.64 +0.29 104.25 104.79 10461
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 = 3.2100 Malaysian ringgit)
($1 = 6.2279 Chinese yuan)