Malaysian palm oil futures dropped 3.7 per cent to the lowest level in nine trading days yesterday as investors focused on weak demand after crude oil, which had inspired a rebound a day before, tumbled, traders said.
A bigger-than-expected rise in US gasoline stocks and a fresh focus on global financial weakness pushed oil markets down a dollar yesterday to around US$68 a barrel.
“Fundamentally, there is nothing to support price so it has to go lower,” said a trader at a Kuala Lumpur-based brokerage, referring to the expected rise in production and flat exports in June.
The benchmark September palm oil contract on the Bursa Malaysia Derivatives Exchange dropped RM84 to RM2,175 a tonne, the weakest since June 22. Overall traded volume was 15,244 lots at 25 tonnes each.
Traders said as palm trees enter the higher production season, consumers tend to wait for prices to drop further before they start buying in preparation for the upcoming Ramadan fasting month, which starts in August.
A likely output rise of more than 5 per cent in June may have brought up palm stocks in the world’s second-biggest producer to 1.5 million tonnes at the end of June from 1.37 million tonnes in May, the trader at the Kuala Lumpur-based brokerage said.
“Our research shows stocks may rise further to 1.6 million tonnes in July and 2 million tonnes by year-end if demand continues to be weak while there is no weather threat to production,” he said. Palm prices correlate inversely with palm oil stocks.
In the Malaysian physical market, palm oil for July delivery was traded at RM2,200 in the central region. No trades were done in the southern region.
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