JAKARTA: Malaysian palm oil futures edged down on Friday as traders took profits after four straight weeks of gains, and on concerns of low demand during the approaching Golden Week holiday in China.
By Friday's close the benchmark August contract on the Bursa Malaysia Derivatives Exchange had slipped 0.91 percent to 2,177 Malaysian ringgit ($668.40) per tonne, erasing gains made earlier in the session. The benchmark is up 3.1 percent this week, near levels last seen in mid-August.
Total traded volume stood at 39,754 lots of 25 tonnes, above the average of 35,000 lots.
"The sell off was caused by profit taking activities," said a trader with a foreign commodities brokerage in Kuala Lumpur, adding that there were concerns about the week-long National Day holiday period due to begin in China on Oct. 1.
"People may want to square some of their positions. The Chinese interest is quite significant, so if the Chinese players are out for holidays the palm oil trade during that period is expected to be slow."
Competing soyoil prices and a tax war between the world's top two palm oil producing nations had helped weaken palm oil prices after positive export data on Thursday carried the benchmark to six-week highs, another trader said.
"After the initial euphoria yesterday, the lower closing overnight on the CBOT, Indonesia's tax war with Malaysia and the conference in India, traders are taking some profit before any major announcements by speakers," a second trader said, referring to anticipated announcements at the Globoil India 2014 conference in Mumbai from Sept. 26 to Sept. 28.
Indonesia, as expected, removed its crude palm oil export tax for October, an industry ministry official said on Friday, following a similar move by Malaysia aimed at boosting overseas sales of the commodity amid weak demand.
India's palm oil imports are likely to climb around 4 percent to 8.25 million tonnes in the marketing year starting November as poor monsoon rains curb growth in local edible oil supplies amid a rise in consumption, a veteran trader said on Friday.
Higher purchases by India, the world's top importer of cooking oils, could support benchmark Malaysian palm oil futures that hit a five-year low earlier this month and have shed almost a fifth of their value so far in 2014.
Palm oil prices are also expected to be supported by a surprise drop in Malaysian palm oil output in September of around 10 percent.
Prices could reach 2,390 over the next three months having remained above a support level at 2,017 ringgit, said Reuters commodities and energy market analyst Wang Tao.
Chicago Board Of Trade Soybeans prices weakened for a second day while corn was largely unchanged near its lowest in four years as dry weather across the U.S. Midwest gave farmers an opportunity to accelerate the pace of harvest.
In other markets, Brent crude held near $97 a barrel on Friday but headed for its biggest monthly drop since April 2013 as rising supplies outweighed fears that U.S.-led strikes against Islamist militants in Syria and Iraq would disrupt oil production.- Reuters
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