Palm oil futures posted the biggest drop in more than a month, tracking declines in crude and soy oil prices, while a strengthening ringgit added to demand headwinds.
Futures fell as much as 2.4% to near RM4,500 a tonne in Kuala Lumpur, extending declines to a third day, after global crude benchmark Brent gave up its war-time gains as the US and Iran made progress on a peace deal. Soy oil in Chicago was 0.6% lower.
Falling prices of oil and gas are eroding the competitiveness of biofuels, meaning there will likely be less demand for feedstocks like palm oil, according to David Ng, a senior trader at IcebergX Sdn. But this could change once Indonesia rolls out its expanded palm-based biodiesel mandate, scheduled for next week, he added.
A mild appreciation in the Malaysian ringgit made shipments from the second-largest producer more expensive, which can be a drag on palm oil demand and prices.
The most widely used vegetable oil "needs positive fundamental triggers to breakout on the upside,” said Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental Ltd. "Production is on the rise and demand is still weak overseas, capping any major upside moves.”
Malaysia’s output rose 4.8% over June 1-20 compared with the same period a month earlier, according to the country’s palm oil association estimates. - Bloomberg
