Palm oil little changed as forecast of strong supply weighs
07/06/2023 (Business Recorder), Kuala Lumpur - Malaysian palm oil futures were virtually unchanged on Wednesday, weighed by forecasts of growing May inventories and production.
The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange rose 2 ringgit, or 0.06%, to 3,318 ringgit ($722.09) a tonne.
The contract had earlier rose 1.75% to an intraday high but retreated as traders covered short positions.
“Production and stock recovery have cast pressure on the palm market. Output is on course to rise through Q3 on the back of seasonality and easing labour shortages,” Refinitiv Agriculture Research said in a note.
“While palm oil exports are expected to improve in the months ahead, the demand upside could be capped by the unappealing prices compared to soft oils,” it added.
Malaysia’s palm oil inventories at the end of May are expected to rise 6.8% from the month before to 1.6 million tonnes as production swells to its highest so far this year, a Reuters survey showed.
The world’s second-largest producer is forecast to experience weak El Nino conditions from June onwards, the environment minister said.
Top producer Indonesia is expecting a severe dry season from the impact of the El Nino weather pattern, threatening harvests and raising forest fire risks, the head of its weather agency said on Tuesday.
Refinitiv said a slowdown in rainfall in Southeast Asia so far is conducive to harvesting, but there are concerns about the upcoming El Niño event, which will bring prolonged dry conditions in Indonesia and Malaysia.
Dalian’s most-active soyoil contract rose 0.03%, while its palm oil contract fell 0.3%. Soyoil prices on the Chicago Board of Trade gained 0.5% after a 3.4% overnight jump.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.