MARKET DEVELOPMENT
VEGOILS-Palm Oil Falls on Worries of Overwhelming Supply
VEGOILS-Palm Oil Falls on Worries of Overwhelming Supply
04/01/2014 (Reuters) - Malaysian palm oil futures ended lower in tight trade on Friday as investors feared that surging supplies of the tropical oil will overwhelm global demand and weigh on prices.
Indonesia, the top producer, said its 2013 palm oil output likely grew to 24.4 million tonnes from 23.5 million tonnes a year ago, due to "an expansion in plantation areas and better weather conditions".
Output in 2014 is seen rising further, to 28 million tonnes, its agriculture ministry said on Friday.
Malaysia, the No. 2 producer, expects its production to hit a record 19.4 million tonnes in 2013 and inch up to 19.5 million tonnes in 2014.
"The main reason palm oil dropped today is because of the Indonesian output news," said a trader with a foreign commodities brokerage.
The benchmark March contract on the Bursa Malaysia Derivatives Exchange had edged down 0.3 percent to 2,640 ringgit ($802) per tonne by Friday's close. Prices traded in a range of 2,625 to 2,644 ringgit.
Total traded volume stood at 21,029 lots of 25 tonnes, below the average 35,000 lots.
Crude palm oil could face increased competition from rival oilseeds that are slated to churn out bumper crops this year.
Technical selling added to the drag on prices, traders said.
"The market has also been up for a number of days before the New Year. So there's some technical correction, but prices are still rangebound," the Kuala Lumpur-based trader added.
Better-than-expected exports in December and warnings of floods over a palm-growing region in Borneo pushed up palm prices by 0.3 percent this week -- their third straight weekly rise -- although demand worries capped gains.
Technicals showed that a bearish target at 2,620 ringgit per tonne remains unchanged for palm oil, as it has broken below a support at 2,639 ringgit, Reuters market analyst Wang Tao said.
In other markets, Brent crude rose above $108 a barrel after posting its biggest daily percentage drop in six months in the prior session, but expectations for a rise in Libyan supply and speculation of a build-up in U.S. stockpiles capped gains.
In other competing vegetable oil markets, the U.S. soyoil contract for March rose 0.2 percent in late Asian trade.
The most active May soybean oil contract on the Dalian Commodities Exchange fell 1.1 percent.
Palm, soy and crude oil prices at 1011 GMT
Contract Month Last Change Low High Volume
MY PALM OIL JAN4 2606 -13.00 2605 2608 78
MY PALM OIL FEB4 2630 -9.00 2616 2633 2060
MY PALM OIL MAR4 2640 -9.00 2625 2644 11162
CHINA PALM OLEIN MAY4 6068 -48.00 6036 6118 529516
CHINA SOYOIL MAY4 6822 -76.00 6812 6880 538488
CBOT SOY OIL MAR4 38.87 +0.07 38.79 39.10 4458
NYMEX CRUDE FEB4 95.31 -0.13 95.13 95.74 14294
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=3.29 Malaysian ringgit)
Indonesia, the top producer, said its 2013 palm oil output likely grew to 24.4 million tonnes from 23.5 million tonnes a year ago, due to "an expansion in plantation areas and better weather conditions".
Output in 2014 is seen rising further, to 28 million tonnes, its agriculture ministry said on Friday.
Malaysia, the No. 2 producer, expects its production to hit a record 19.4 million tonnes in 2013 and inch up to 19.5 million tonnes in 2014.
"The main reason palm oil dropped today is because of the Indonesian output news," said a trader with a foreign commodities brokerage.
The benchmark March contract on the Bursa Malaysia Derivatives Exchange had edged down 0.3 percent to 2,640 ringgit ($802) per tonne by Friday's close. Prices traded in a range of 2,625 to 2,644 ringgit.
Total traded volume stood at 21,029 lots of 25 tonnes, below the average 35,000 lots.
Crude palm oil could face increased competition from rival oilseeds that are slated to churn out bumper crops this year.
Technical selling added to the drag on prices, traders said.
"The market has also been up for a number of days before the New Year. So there's some technical correction, but prices are still rangebound," the Kuala Lumpur-based trader added.
Better-than-expected exports in December and warnings of floods over a palm-growing region in Borneo pushed up palm prices by 0.3 percent this week -- their third straight weekly rise -- although demand worries capped gains.
Technicals showed that a bearish target at 2,620 ringgit per tonne remains unchanged for palm oil, as it has broken below a support at 2,639 ringgit, Reuters market analyst Wang Tao said.
In other markets, Brent crude rose above $108 a barrel after posting its biggest daily percentage drop in six months in the prior session, but expectations for a rise in Libyan supply and speculation of a build-up in U.S. stockpiles capped gains.
In other competing vegetable oil markets, the U.S. soyoil contract for March rose 0.2 percent in late Asian trade.
The most active May soybean oil contract on the Dalian Commodities Exchange fell 1.1 percent.
Palm, soy and crude oil prices at 1011 GMT
Contract Month Last Change Low High Volume
MY PALM OIL JAN4 2606 -13.00 2605 2608 78
MY PALM OIL FEB4 2630 -9.00 2616 2633 2060
MY PALM OIL MAR4 2640 -9.00 2625 2644 11162
CHINA PALM OLEIN MAY4 6068 -48.00 6036 6118 529516
CHINA SOYOIL MAY4 6822 -76.00 6812 6880 538488
CBOT SOY OIL MAR4 38.87 +0.07 38.79 39.10 4458
NYMEX CRUDE FEB4 95.31 -0.13 95.13 95.74 14294
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=3.29 Malaysian ringgit)