JAKARTA: Malaysian palm oil subsided further on Friday, falling for an eighth-consecutive session to its lowest in more than five years as soybean and crude prices weighed on the market, and defaults and volatility spooked traders.
The the benchmark November contract on the Bursa Malaysia Derivatives Exchange fell to 1,989 ringgit ($629) per tonne in afternoon trading, its lowest level since July 2009.
By Friday's close, the contract had fallen 1.9 percent to 2,000 ringgit, down 4.4 percent for the week in its third consecutive week of declines.
Total traded volume on Friday stood at 47,789 lots of 25 tonnes, above the average 35,000 lots.
"It still looks weak," said a trader with a foreign commodities brokerage in Kuala Lumpur, referring to weak soy and crude prices today. Open interest in the contract was rising despite the market being oversold, another trader said, indicating that prices could fall further.
"Someone is (still) selling."
The decline in palm oil prices by more than 200 ringgit per tonne this month has put buyers and traders in difficult positions as banks and credit sources tightened, one trader said, referring to a buyer that had defaulted.
"When you talk about big numbers like $70 (a tonne) then life is very difficult," he said.
"All the traders you talk to will fear the extreme volatility in the market," the trader said. "This kind of a price drop always brings misery of this kind. Where do you go with someone who says I cannot do it?"
According to CIMB Investment Bank Plantations Analyst Ivy Ng, negative sentiment had caused a selloff in the afternoon.
"People were getting more and more worried about how the prices are progressing," Ng said referring to a breach in the 2,016 support level shortly after the midday break.
In other markets, Chicago soybeans rose on Friday from contract lows as strong demand underpinned the market but the oilseed is still poised for a second week of decline on expectations of record U.S. production.
Brent crude oil futures drifted lower on Friday, further below $103 a barrel, as a strong dollar and plentiful supplies continued to pressure prices.
In other competing vegetable oil markets, the U.S. soyoil contract for December edged down 0.3 percent in Asian trade, while the most active September soybean oil contract on the Dalian Commodities Exchange rose 0.17 percent.
($1 = 3.1600 Malaysian ringgit) ($1 = 6.1510 Chinese yuan) - Reuters
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