Malaysian crude palm oil futures extended losses on concern demand may slow after Chinese New Year holidays, putting it on course for a third week of declines.
Palm oil for April delivery declined 0.3 percent to 1,776 ringgit ($494) a metric ton on the Malaysia Derivatives Exchange at the 12:30 p.m. trading break. Futures slid almost 5 percent in the previous two weeks.
The Chinese Lunar New Year, being celebrated this week in China, fell on Jan. 26 this year, earlier than usual, signaling demand will ease shortly, analysts said.
“The bias is on the downside because of an absence of major celebrations to spur demand,” Fordyanto Widjaja, an analyst at Morgan Stanley Research Asia Pacific, said by phone in Singapore.
Malaysian palm oil exports declined 24 percent in the first 25 days of this month from the same period in December, Societe Generale de Surveillance, an independent cargo surveyor, said yesterday. Shipments were a record 1.6 million tons last month.
A slide in prices of crude oil and soybean oil, the main substitute for palm, also weighed on prices
Crude oil for March delivery dropped as much as 2 percent in Asian trading. Futures were down 1.6 percent to $41.50 a barrel at 12:35 p.m. Singapore time.
Palm oil, used mostly in food, can be used as alternative fuel and often tracks crude oil’s performance.
Soybean Oil Premium
Soybean oil for March delivery declined 0.4 percent to 32.77 cents a pound in Chicago at 12:09 p.m. Singapore time. Still, the vegetable oil is 47 percent more expensive than palm, according to data on the Bloomberg.
Drought may cut by 25 percent this year’s soybean harvest in Argentina, the largest exporter of soybean oil, from last year, Ricardo Forbes, president of the Buenos Aires Cereals Exchange, said last week.
“The supply of soybeans from the southern hemisphere may be lower than expected,” Widjaja added. “Between now and mid- February, if the weather remains as it is, palm oil prices could be supported by the strengthening of soybean prices.”
Palm oil has a “good support” at 1,800 ringgit, he said.
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