15/06/2010 (Bloomberg) - Palm oil futures declined on concern that supplies may increase in the coming months while a set of export data indicated a possible drop in demand from China, the biggest user of edible oils.

Palm oil for August delivery dropped as much as 1.3 percent to 2,378 ringgit ($729) a metric ton on the Malaysia Derivatives Exchange, more than erasing yesterday’s gain, which was the best advance in three weeks. It closed at 2,391 ringgit.

“Rising soybean supply from South America” limited any upside for palm oil, said an AmResearch report today. Soybean oil is a direct substitute for palm oil.

The tropical commodity also declined after a set of export estimates showed Malaysian shipments may have dropped in the first 15 days of the month, led by China.

Palm oil exports from Malaysia, the world’s second-largest producer, dropped 2 percent to 608,324 tons in the first 15 days of June, said market surveyor Societe Generale de Surveillance.

Exports to China dropped 7.6 percent to 189,184 tons from 175,892 tons a month earlier, the data showed, while sales to India and the subcontinent gained to 40,805 tons from 22,000 tons in May.

The SGS data contradicted earlier estimates by another surveyor, Intertek. Shipments for June 1-15 climbed 1.5 percent to 600,921 tons, led by a 28 percent advance in Chinese orders to 206,450 tons, Intertek said. Dispatches to India and the subcontinent dropped to 62,202 tons from 86,230 tons.

The two surveyors provide preliminary estimates five times a month, with the official monthly data released by the Malaysian Palm Oil Board on the 10th of the following month.

Technical Support

Concern over higher supplies from soybean and palm-oil producers oil would push palm oil below 2,400 ringgit a ton, as the European credit crisis hurts purchasing power, a Kenanga Investment Bank Bhd. report predicted correctly yesterday.

The “technical support level to watch for now is 2,369 ringgit,” it added.

Palm-oil supply typically rises in the second half of the year. This year, South American supplies of soybean oil are at a record high.

Soybeans on the Chicago Board of Trade declined 0.1 percent to $9.1524 a bushel at 5:58 p.m. Singapore time.

Chicago soybean oil dropped for the first time in six days, easing 0.1 percent to 37.37 cents a pound, reducing the premium over palm oil to $91.65 a ton, or 27 percent below the 12-month average, according to Bloomberg data.

CME Group Inc.’s September-delivery palm oil contract, which is pegged to the Malaysian benchmark price, dropped 0.2 percent to $730 a ton. The Dalian Commodity Exchange is closed until Thursday.

Palm oil fell even as crude oil advanced, which typically burnishes the appeal of vegetable oils used to make biofuels. Crude oil in New York for July delivery reversed an earlier loss to advance 1 percent to $75.88 a barrel.