JAKARTA, July 28: Malaysian crude palm oil futures fell 2.2 per cent to the lowest level in more than eight months on Monday as worries about a build-up in supply weighed on the market, dealers said.
Palm oil, which is used in products from soaps to biofuel, has given up all of this year’s price gains, and is now down 1.6 per cent since the start of 2008 on worries about overseas demand and falling crude oil.
The benchmark October contract on the Bursa Malaysia Derivatives Exchange closed down 2.25 per cent, or 69 ringgit, at 3,001 ringgit ($919) a ton, the lowest level since November 7, 2007.
Nothing has changed fundamentally. Stocks are still high.
But crude oil is supportive for the market,” said a dealer in a local brokerage firm.
Other traded months were between 12 ringgit and 79 ringgit lower. Overall volume was 11,148 25-ton lots.
Players estimated that full-month exports combined with local consumption in July would amount to between 1.5-1.6 million tons.
Malaysian Commodities Minister Peter Chin was quoted on Sunday as saying the government would take urgent measures to counter the recent slide in international crude palm oil prices and ensure it does not become a long-term trend. Malaysia is the world’s second-largest producer of crude palm oil.
Chin said the government would lower the current stock of crude palm oil in Malaysia by exporting it to countries such as India, Pakistan, China and the Middle East, instead of exporting refined palm oil, while increasing exports in winter to western countries where it could be used as bio-fuel.
Other measures include increasing the use of crude palm oil for bio-fuel production, encouraging local power producers to use crude palm oil as a raw material, and having more industries use the commodity as feedstock fuel, instead of diesel, he said.
But firm crude oil prices offered some support to the market, dealers said, rekindling demand for the vegetable oils for alternative energy.
Oil rose towards $124 a barrel on Monday, rebounding from a seven-week low, in what analysts said was technical buying and short-covering after recent declines left the market oversold.
Palm oil producers in North Sumatra’s Medan, home to Belawan port which is the key port for palm oil exports, did not hold any auction on Monday.
Indonesian palm oil prices rose on Monday, tracking recovery in the Malaysian market in the morning, but trading was thin as the volatile market kept players cautious.
The state marketing centre in Jakarta sold crude palm oil at 8,383 rupiah ($0.920) a kg, up from 8,321 rupiah a kg on Friday, FOB Belawan port in Sumatra.
Malaysia rebounded in the afternoon and that helped lift local prices, said an auction official at the centre which sells palm oil from state plantation.
Refiners in Jakarta offered RBD palm olein, used as cooking oil, at 8,650 rupiah a kg, up from 8,600 rupiah a kg on Friday.
In the physical market, July/August crude palm oil was offered at 3,070/3,100 ringgit in the southern region. Trades were done at 3,100-3,170 ringgit.—Reuters