Palm Oil Ends Lower, Breaking Seven-Consecutive Sessions of Gains
16.01.2024 (Chemanalyst) - On Monday, Malaysian Palm Oil futures faced a downturn, bringing an end to a seven-session winning streak, as concerns about demand in crucial markets exerted downward pressure. Nonetheless, a reduction in producing Palm Oil played a mitigating role in limiting the extent of the losses.
Factors such as reduced production in leading producers Indonesia and Malaysia, along with tensions in the Red Sea, contributed to restricting losses in Malaysian Palm Oil futures. However, apprehensions regarding demand from major destinations, including China and India, acted as a counterforce, tempering potential gains. Mitesh Saiya, the trading manager at Mumbai-based firm Kantilal Laxmichand & Co, emphasized the significance of these factors in shaping the trajectory of Malaysian Palm Oil futures.
Malaysia experienced a notable decline of 13.31% in crude Palm Oil production, falling from November's figures to 1.55 million tons in December. Concurrently, Palm Oil exports also recorded a decrease of 5.12% to 1.33 million tons during the same period, according to data from the Malaysian Palm Oil Board (MPOB). The export performance for January 1-15 was estimated to be down by 2.6%, amounting to 604,474 tons, based on information from independent inspection company AmSpec Agri Malaysia. However, conflicting data emerged from cargo surveyor Intertek Testing Services, thereby indicating a 6.5% increase in exports to 629,918 tons during the same period.
In the Dalian Commodity Exchange, the most active soyoil contract remained unchanged, while the Palm Oil contract added 0.3%. The interconnected nature of Palm Oil with other oils in the global vegetable oils market renders it susceptible to price movements in related commodities.
The broader oil market experienced an upward trajectory on Monday, driven by concerns about potential disruptions in the Middle East. Strikes by U.S. and British forces aimed at preventing Houthi militia in Yemen from attacking ships in the Red Sea heightened concerns, leading to an increase in crude oil futures. This rise in the prices of crude oil made Palm Oil a more attractive option for biodiesel feedstock.
Looking forward, Malaysian Palm Oil output is anticipated to see improvement in the coming year, attributed to a reduction in labor shortages. However, the industry faces persistent challenges as planters strive to comply with European and U.S. regulations targeting alleged connections to deforestation and forced labor. These challenges were deliberated upon at a seminar held last Thursday, underscoring the ongoing efforts to navigate the complex landscape of the Palm Oil sector.