Palm Oil At 3-week Low On High Stocks, Markets
09/06/2011 (Business Recorder) - Malaysian palm oil dropped to a three-week low on Wednesday as investors adjusted positions on weak technicals, lacklustre external markets and expectations of high stocks.
Stocks in Malaysia are expected to rise to a 16-month high in May as production jumps, although traders are waiting to see if cargo surveyors show strong demand from buyers eager to restock on current price correction.
"External markets are not giving much direction and palm oil is getting weighed down by the high stocks," said a dealer with a local commodities brokerage.
"Exports are expected to be good, but whether they can keep up with the tremendous growth in production is another thing."
By midday, the benchmark August crude palm oil contract on the Bursa Malaysia Derivatives Exchange, fell as much as 1.2 percent to 3,313 ringgit ($1,102) a tonne, a level unseen since May 18, before trading at 3,327 ringgit.
Overall traded volume stood at 7,366 lots of 25 tonnes each, lower than the usual 12,500 lots.
A bearish target has been established at 3,234 ringgit per tonne for Malaysian palm oil as a double-top pattern was confirmed, said Reuters analyst Wang Tao.
On a packed data calendar this week, the Malaysian Palm Oil Board is due to release stocks, export and production numbers on Friday.
Also on Friday, Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance are scheduled to issue June 1-10 palm oil export numbers.
Edible oil markets will also take cues from the US Department of Agriculture, which releases its June supply-demand report on Thursday and is likely to point to tight grain supply.
US soyoil for July delivery edged higher in Asian trade.
China's most-active January 2012 soybean oil slipped although traders are expecting some gains later on after the country lifted a seven-month cap on edible oil prices.
"Margins are negative generally but for palm oil, any increase in the retail prices offers some breathing space and some decent demand. Not a fantastic increase but decent enough," said a Malaysian trader dealing with China.