Palm oil fell from a near one-month high following weakness in the crude and vegetable oil complex, denting the appeal of biofuels.
Futures dropped as much as 0.9% to RM4,602, nearly erasing the previous day’s gain. Benchmark Brent crude dipped after a two-day gain as mediators seek to broker a new truce in the Middle East, while the US and Iran continue their hostilities. Chicago soybean oil was flat after declining on Monday.
"Weakness in soybean oil and crude oil is what is driving market sentiment today,” said David Ng, a senior trader at IcebergX Sdn. Lower palm prices on the Dalian Commodity Exchange added to the bearishness, he said.
Malaysia’s palm oil exports were estimated to have increased 4% between July 1-20 from a month earlier, according to data from cargo surveyor Intertek Testing Services. While that’s a bullish demand signal, the outlook for expanding stockpiles in producing nations presents a downside risk for prices.
Malaysia’s inventories are set to swell to a record high this year as production outpaces exports, according to a Bloomberg Intelligence report. Annual output could top 20 million tons despite the onset of El Niño, which leads to hot and dry conditions, with the impact likely more acute next year, it added. - Bloomberg
