The Edge Markets (05/11/2018) - KUALA LUMPUR (Nov 5): Malaysian palm oil futures fell over 1% in early trade on Monday, on expectation of higher inventories in October and tracking weakness in crude oil prices.

Palm oil stocks at end-October are forecast to rise to the highest in three years at nearly 3 million tonnes amid a seasonal rise in output and a slip in export demand, according to a Reuters survey.

Inventories are expected to climb for a fifth straight month, rising 14.1% from September to 2.90 million tonnes, while exports are forecast to fall 13% to 1.41 million tonnes.

Production is expected to rise 5.7% to 1.96 million tonnes.

The benchmark palm oil contract for January delivery on the Bursa Malaysia Derivatives Exchange was down 0.7% at RM2,139 (US$513.20) a tonne at the midday break, heading for a fourth session of decline in five. Earlier in the session, it fell as much as 1.2% to RM2,128.

Trading volumes stood at 8,688 lots of 25 tonnes each at noon.

"Estimates for October stock levels are high, so this will continue to put pressure on prices," said a futures trader in Singapore.

"We will see downward pressure (on prices) until stocks are stable."

Weak crude oil prices also weighed on the market, said another futures trader. Palm oil prices are impacted by the movements of crude oil, as the edible oil is used as feedstock to make biodiesel.

Oil prices fell further on Monday as the start to US sanctions against Iran's fuel exports was softened by waivers that will allow major buyers to import Iranian crude, at least temporarily.

In other related edible oils, the Chicago December soybean oil contract was down 0.04%.

The January soybean oil contract on the Dalian Commodity Exchange and the January palm oil contract were both flat around 0515 GMT.

Palm oil prices are affected by movements of other edible oils as they compete for a share in the global vegetable oil market.

Palm oil may end its current bounce in a resistance zone of RM2,162-2,182 per tonne and resume its downtrend, said Wang Tao, a Reuters market analyst for commodities and energy technicals.

Palm, soy and crude oil prices at 0517 GMT

Contract                     Month    Last   Change   Low    High   Volume

MY PALM OIL              NOV8    2005    +20.00    2005    2005      20

MY PALM OIL              DEC8     2069    -18.00    2065    2075     336

MY PALM OIL              JAN9     2139     -14.00    2128    2145    4905

CHINA PALM OLEIN   JAN9     4558     +0.00    4546    4588  212940

CHINA SOYOIL           JAN9     5528     +0.00    5468    5544  262430

CBOT SOY OIL           DEC8     28.2      +0.00   28.19   28.29    1716

INDIA PALM OIL         NOV8   565.00    -1.70     564.90   566.9      32

INDIA SOYOIL            NOV8   758.35   -0.70     758.35     759     100

NYMEX CRUDE         DEC8    62.68    -0.46      62.52   63.07   34554

Palm oil prices in Malaysian ringgit per tonne

CBOT soy oil in US cents per pound

Dalian soy oil and RBD palm olein in Chinese yuan per tonne

India soy oil in Indian rupee per 10 kg

Crude in US dollars per barrel

(US$1 = RM4.1680)

(US$1 = 72.9100 Indian rupees)

(US$1 = 6.9126 Chinese yuan)