MARKET DEVELOPMENT
VEGOILS-Palm Falls on Bigger Stockpile Jitters, Posts 3rd Weekly Drop
VEGOILS-Palm Falls on Bigger Stockpile Jitters, Posts 3rd Weekly Drop
07/06/2014 (Reuters) - Malaysian palm oil futures edged lower on Friday to record their third straight weekly fall, as a stronger ringgit and weaker soyoil markets continued to drag, along with the prospect of bigger stockpiles.
Market estimates peg palm oil stocks in Malaysia at a four-month high of 1.81 million tonnes at end-May, a Reuters poll ahead of official data showed, after an uptick in production outpaced export demand.
"Right now the worry is the rising end-stocks. That is the prevailing sentiment for the time being, unless unexpected demand comes in," said a trader with a foreign commodities brokerage in Kuala Lumpur.
"With the ringgit strengthening, demand for palm oil will weaken. So with the lower exports and high end-stocks, it is difficult for prices to go up."
The benchmark August contract on the Bursa Malaysia Derivatives Exchange had edged down 0.2 percent to 2,412 ringgit ($751) per tonne by Friday's close with prices trading between 2,394 and 2,418 ringgit.
Total traded volume stood at 27,646 lots of 25 tonnes, below the usual 35,000 lots.
Technicals, however, were slightly bullish. Palm oil may find support at 2,395 ringgit per tonne and rise towards resistance at 2,446 ringgit, driven by a wave c, said Reuters market analyst Wang Tao.
A stronger ringgit erodes margins for overseas investors and refiners, curbing buying interest for the ringgit-denominated feedstock.
The Malaysian ringgit advanced 0.5 percent on Friday to 3.2130 per dollar, buoyed by stronger-than-expected Malaysian trade surplus data in April.
Palm prices slid 10 percent from a May 15 peak of 2,630 ringgit to fall to seven-and-a-half month lows earlier this week, weighed by a strong ringgit, weakness in competing soyoil markets, and poor export data.
Prices this week fell 0.5 percent to record their third weekly loss in a row.
In competing vegetable oil markets, the U.S. soyoil contract for July edged up 0.7 percent in late Asian trade, while the most active September soybean oil contract on the Dalian Commodities Exchange shed 0.5 percent.
Palm typically tracks rival soy oil as both edible oils are common food and fuel substitutes.
While there is a bigger possibility that the El Nino weather phenomenon will return this year, palm growers and traders expect crop damage to be minimal for now, but do not rule out that prices could surge in the event of a severe drought. Extreme dry weather would damage growth of fresh fruit and dent palm yields several months later, and could potentially cause prices to spike next year.
"We maintain our crude palm oil price assumption of 2,800 ringgit per metric tonne for 2014 assuming normal weather pending the actual occurrence of El Nino, if it indeed happens," said Kenanga Investment Bank analyst Alan Lim in a report.
"However, our model shows that crude palm oil prices could surge above 3,000 ringgit per metric tonne in 2015 assuming a five percent drop in Malaysian CPO production in 2015."
In other markets, Brent crude oil rose above $109 a barrel on Friday, buoyed by optimism that monetary stimulus in the euro zone will lift economic growth and demand for fuel.
Palm, soy and crude oil prices at 1019 GMT
Contract Month Last Change Low High Volume
MY PALM OIL JUN4 2420 -3.00 2400 2422 173
MY PALM OIL JUL4 2420 -5.00 2403 2424 943
MY PALM OIL AUG4 2412 -5.00 2394 2418 14419
CHINA PALM OLEIN SEP4 5836 -40.00 5804 5850 157556
CHINA SOYOIL SEP4 6728 -36.00 6692 6734 177426
CBOT SOY OIL JUL4 38.95 +0.26 38.66 38.96 4282
NYMEX CRUDE JUL4 102.64 +0.16 102.32 102.76 11227
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 = 3.2115 Malaysian ringgit)
($1 = 6.2502 Chinese yuan)
Market estimates peg palm oil stocks in Malaysia at a four-month high of 1.81 million tonnes at end-May, a Reuters poll ahead of official data showed, after an uptick in production outpaced export demand.
"Right now the worry is the rising end-stocks. That is the prevailing sentiment for the time being, unless unexpected demand comes in," said a trader with a foreign commodities brokerage in Kuala Lumpur.
"With the ringgit strengthening, demand for palm oil will weaken. So with the lower exports and high end-stocks, it is difficult for prices to go up."
The benchmark August contract on the Bursa Malaysia Derivatives Exchange had edged down 0.2 percent to 2,412 ringgit ($751) per tonne by Friday's close with prices trading between 2,394 and 2,418 ringgit.
Total traded volume stood at 27,646 lots of 25 tonnes, below the usual 35,000 lots.
Technicals, however, were slightly bullish. Palm oil may find support at 2,395 ringgit per tonne and rise towards resistance at 2,446 ringgit, driven by a wave c, said Reuters market analyst Wang Tao.
A stronger ringgit erodes margins for overseas investors and refiners, curbing buying interest for the ringgit-denominated feedstock.
The Malaysian ringgit advanced 0.5 percent on Friday to 3.2130 per dollar, buoyed by stronger-than-expected Malaysian trade surplus data in April.
Palm prices slid 10 percent from a May 15 peak of 2,630 ringgit to fall to seven-and-a-half month lows earlier this week, weighed by a strong ringgit, weakness in competing soyoil markets, and poor export data.
Prices this week fell 0.5 percent to record their third weekly loss in a row.
In competing vegetable oil markets, the U.S. soyoil contract for July edged up 0.7 percent in late Asian trade, while the most active September soybean oil contract on the Dalian Commodities Exchange shed 0.5 percent.
Palm typically tracks rival soy oil as both edible oils are common food and fuel substitutes.
While there is a bigger possibility that the El Nino weather phenomenon will return this year, palm growers and traders expect crop damage to be minimal for now, but do not rule out that prices could surge in the event of a severe drought. Extreme dry weather would damage growth of fresh fruit and dent palm yields several months later, and could potentially cause prices to spike next year.
"We maintain our crude palm oil price assumption of 2,800 ringgit per metric tonne for 2014 assuming normal weather pending the actual occurrence of El Nino, if it indeed happens," said Kenanga Investment Bank analyst Alan Lim in a report.
"However, our model shows that crude palm oil prices could surge above 3,000 ringgit per metric tonne in 2015 assuming a five percent drop in Malaysian CPO production in 2015."
In other markets, Brent crude oil rose above $109 a barrel on Friday, buoyed by optimism that monetary stimulus in the euro zone will lift economic growth and demand for fuel.
Palm, soy and crude oil prices at 1019 GMT
Contract Month Last Change Low High Volume
MY PALM OIL JUN4 2420 -3.00 2400 2422 173
MY PALM OIL JUL4 2420 -5.00 2403 2424 943
MY PALM OIL AUG4 2412 -5.00 2394 2418 14419
CHINA PALM OLEIN SEP4 5836 -40.00 5804 5850 157556
CHINA SOYOIL SEP4 6728 -36.00 6692 6734 177426
CBOT SOY OIL JUL4 38.95 +0.26 38.66 38.96 4282
NYMEX CRUDE JUL4 102.64 +0.16 102.32 102.76 11227
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 = 3.2115 Malaysian ringgit)
($1 = 6.2502 Chinese yuan)