KUALA LUMPUR: Palm oil futures headed for their lowest close in seven weeks on lingering concerns that demand from key buyer China will weaken after the Lunar New Year festival next month.
Prices in Kuala Lumpur dropped as much as 1.7% to RM3,293 per tone, Singapore futures fell 1.3%, while Dalian palm olein declined 0.8%.
Concerns about dwindling demand continue to pressure prices, said Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental.
China’s festival demand is over, and that’s the reason why this month’s export figures look weak compared to December, he said.
Still, long-term fundamentals factors such as low stockpiles and weaker production are limiting losses, he added.
Exports from Malaysia slumped over 40% in the first half of January from a month earlier, according to AmSpec Agri, while cargo surveyors Intertek Testing Services and SGS Malaysia reported weaker shipments to India, China and Europe.
Data for the Jan. 1-20 period will be released on Wednesday.
Prices probably saw their peak for the year in early January, according to a Fitch Solutions note dated Jan. 18.
Barring a further rally in soybeans, palm oil will continue easing as import demand from China and India drops due to uncompetitive prices, it said.
However, Fitch Solutions forecast prices to remain elevated in the first quarter and average at an 11-year high of RM3,050 in 2021.
Palm for April delivery on Bursa Malaysia Derivatives dropped as much as 1.7% to RM3,293. - Bloomberg
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