KUALA LUMPUR: Malaysian palm oil futures fell more than 1 per cent on Monday, pressured by expected higher inventories in October and tracking weakness in crude oil prices.
Palm oil stocks at the end of October are forecast to rise to their highest in three years at nearly 3 million tonnes amid a seasonal rise in output and a slip in export demand, a Reuters survey showed.
Inventories are expected to climb for a fifth straight month, rising 14.1pc from Sept to 2.9m tonnes, while exports are forecast to fall 13pc to 1.41m tonnes. Production, meanwhile, is expected to rise by 5.7pc to 1.96m tonnes.
The benchmark palm oil contract for January delivery on the Bursa Malaysia Derivatives Exchange was down 1.4pc at 2,124 ringgit ($508.99) a tonne at the end of the trading day, having fallen as low as 2,118 ringgit on the way to its fourth decline in five sessions. Trading volumes stood at 29,822 lots of 25 tonnes each at the close.
“Estimates for October stock levels are high, so this will continue to put pressure on prices,” said a futures trader in Singapore.
“We will see downward pressure (on prices) until stocks are stable.” Weak crude oil prices also weighed on the market, another futures trader said. Palm oil prices are affected by the movements of crude oil because the edible oil is used as feedstock for biodiesel.
Published in Dawn, November 6th, 2018