06/09/2022 (The Edge Markets), Kuala Lumpur - Palm oil posted its lowest close since late July on a retreat in rival soybean oil, concerns about bulging stockpiles in top growers and lackluster demand from Chinese buyers.

The world’s most-used cooking oil has tumbled more than 40% in the past four months, as top shipper Indonesia ramped up exports to cut down its bloated inventories. Supplies are set to rapidly rise in No. 2 producer Malaysia, with a Bloomberg survey forecasting that reserves climbed 15.8% from a month earlier to

2.05 million tonnes in August, the highest in almost three years.

Production is seen jumping more than 8%.

Prices are dropping to track weakness in the Chicago soybean oil market, and on expectations of higher output and inventories in Malaysia, according to David Ng, senior trader at IcebergX Sdn Bhd in Kuala Lumpur. The Malaysian Palm Oil Board will release official stockpiles, production and export data on Sept 12.

Palm oil futures for November delivery fell as much as 4% to RM3,761 (US$836) a tonne, before finishing at RM3,799 in Kuala Lumpur. Soybean oil fell 2.2% in Chicago, after closing 4.2% higher on Friday. The US market was closed on Monday for a holiday.  

Investors are also keeping a watch on export demand.

Although consumption of edible oils in top importer India is expected to increase ahead of some major festivals, there are worries about dwindling demand from China.

Parts of Guiyang, capital of the southern Guizhou province, have been sealed off as part of the nation’s Covid Zero strategy. It comes as Chengdu extended a stay-at-home order for its 21 million residents. The southern technology hub of Shenzhen continues to be subject to movement controls.

Malaysian exporters will face stiffer competition as Indonesia aggressively tries to flush down its own excess stockpiles, Ng said. Sluggish demand from China amid new lockdowns is further adding pressure on the palm oil market, he said.

Prices

·         Palm for November delivery on Bursa Malaysia Derivatives -3% to close at RM3,799/tonne,  the lowest since July 26; -19%YTD.

·         Soybean oil for December in Chicago drops 2.2% to 64.82c/lb.

·         Refined palm oil for January on Dalian Commodity Exchange -0.1% to close at 8,054 yuan/tonne; soybean oil for January +0.4% to 9,558 yuan/tonne.

·         Soybean oil’s premium over palm ~US$588/tonne versus average of ~US$240 in past year; data compiled by Bloomberg.

·         Palm’s discount over gasoil ~US$252/tonne versus average premium of ~US$278 in past year: data compiled by Bloomberg.

https://www.theedgemarkets.com/article/palm-oil-hits-sixweek-low-swelling-reserves-and-demand-worry