Palm oil extends drop toward November low as demand outlook dims

The likelihood that plantations in Sabah will continue operations will ease concern over output losses in February and weigh on palm prices.

KUALA LUMPUR: Palm oil is heading for its lowest close in almost three months as traders assess mounting concern about the strength of demand against a voluntary lockdown in Malaysia’s top producing state.

Futures declined for a third day. Crude palm oil for third months fell to a low of RM3,196 per tonne Tuesday. Data this week showed Malaysian exports sank about 35% in January, signaling weaker demand.

China is also buying a massive amount of soybeans to feed its hog population, which could lead to higher production of an oil that rivals palm.

“The January export numbers were very depressing and there is not much fresh demand coming from destination markets, ” said Anilkumar Bagani, research head of Mumbai-based Sunvin Group.

Investors will now focus on January production and stockpile numbers at the end of this month to assess the supply outlook.

The likelihood that plantations in Sabah will continue operations will ease concern over output losses in February and weigh on palm prices, Bagani said.

Malaysia will allow palm estates in Sabah to remain open and carry on some activities, such as harvesting and transportation of palm fruit, even after six Covid-19 clusters linked to palm oil workers were discovered.

This follows a proposal from the industry for a voluntary lockdown, which will see operations continuing under strict conditions.- Bloomberg