Palm extends losses, falls nearly 2% on price rally, sluggish export demand

Malaysian palm oil futures slipped nearly 2 per cent on Wednesday, extending losses into a second session, according to Business Recorder. The benchmark November contract traded on Bursa Malaysia Derivatives Exchange closed 93 ringgit lower, or 1.88 per cent, at 4,853 ringgit ($1,206.31) per metric ton. It had already dropped 1.43 per cent in the prior session.

Paramalingam Supramaniam, a director at brokerage Pelindung Bestari, said the recent rally had reduced demand, because soybean oil at Indian ports is now cheaper than palm, and refining margins remain razor thin. He warned that inventories would probably build without a stronger pickup in demand, particularly as output peaks in September and October. Cargo surveyors estimated Malaysian palm product shipments from August 1 to 25 dropped 11.4 to 20 per cent versus a month before.

Crude oil futures slid as Iran and Oman negotiations rekindled expectations of reopening the Strait of Hormuz, which would ease shipping limits in the Middle East. Crude prices lost over $2 per barrel, hitting their weakest point in a fortnight. Lower crude makes palm less appealing as a biodiesel feedstock, while a 0.54 per cent gain in the ringgit against the dollar raises the cost for foreign buyers.