Malaysian palm oil price falls on weak yuan, demand worries

20.07.2016

Malaysian palm oil futures fell on Tuesday, after a brief recovery, as the weak Chinese yuan is seen hurting demand amid signs of waning exports.

Benchmark palm oil futures on the Bursa Malaysia Derivatives Exchange were down 0.9 percent to 2,258 ringgit  ($566.13) per tonne by the mid-day break.

Prices had climbed to a one-week high of 2,299 on Friday, after hitting a 10-month low of 2,186 ringgit earlier last week.

"The story on yuan did contribute to the lower prices," a palm trader in Kuala Lumpur said. "It makes palm prices more expensive (for Chinese buyers)."

The yuan on Monday slipped below the psychologically important 6.7 level for the first time in more than five years and expected to stay under depreciation pressure in the near term.

Prices of the edible oil have been under pressure as last week's data showed weak demand and an increase in production.   

Palm oil output in Malaysia, the world's second-largest producer, rose about 12 percent in June, while inventories gained for the first time in seven months, data from the Malaysian Palm Oil Board (MPOB) showed last week. But in a sign of waning demand, exports dropped more than expected, hurting prices.

Traders will be closely monitoring Malaysian export data from Intertek Testing Services on Wednesday for the July 1-15 period.

Meanwhile, Indonesian exports in June fell 6 percent while the output rose for a second month, a Reuters survey showed.

While dryness across Southeast Asia, related to the El Nino, is expected to curb global palm output this year, the possible emergence of a La Nina event bringing rains to the region could help improve fruit yields.    

On a technical basis, prices may drop into a range of 2,224-2,237 ringgit per tonne, as it could have completed a bounce from the July 12 low of 2,186 ringgit.

The most actively traded September contract for palm olein on the Dalian Commodity Exchange fell around 1.1 percent while Dalian soybean oil, a substitute for palm



The Star

 

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