10/10/2016 (Hindu Business Line) - Crude Palm Oil (CPO) futures on MCX dropped by 7per cent last week to test a low of ₹504.70 per kg from the high of ₹542.20 per kg. In Bursa Malaysian Derivatives exchange, the CPO futures contract fell by 3 per cent to test a weekly low of MYR 2,538 per tonne. The negative sentiment follows weakness in the CBOT soy oil market on improvement in soybean harvesting across US has also added to the negative sentiment in the CPO market. The two oils being substitute to each other show a positive correlation in prices. Prices have come under pressure also because the Indian government reduced the import duty on palm oil to 7.5 per cent from 12.5 per cent two weeks back.

Outlook

In the week ahead, CPO futures contract may recover from current lows on short covering andfresh buying at lower levels. Moreover, Chinese market is re-opening after a week-long holiday, which might see fresh purchase of palm oil from producing regions. However, supply demand dynamics are expected to be bearish for the market.