Palm posts biggest weekly loss in 2-1/2 mths on fears of output rise

Palm posts biggest weekly loss in 2-1/2 mths on fears of output rise
Business & Markets 2013
Written by Reuters
Friday, 13 September 2013 19:45

* Palm on track to post worst weekly performance since end-June
* Higher output could lift stocks in September — trader
* Palm oil neutral in 2,323-2,361 ringgit range — technicals

KUALA LUMPUR (Sept 13): Malaysian palm oil futures edged up on Friday, as buying interest surged after prices fell to the lowest in more than three weeks, although fears remained that stocks of the tropical oil would surge.

Despite the gain, palm oil futures still posted their worst weekly performance in more than two months, after forecasts of rising output in Southeast Asia raised concerns over rising inventory levels.

Traders and analysts warn that inventory levels in Malaysia — the world's No.2 producer, may climb higher from September onwards, as steadily higher production outweigh exports.

Investors also turned bearish, after leading industry analyst Dorab Mistry said Indonesia and Malaysia will seasonally produce more palm oil until at least until April 2014. Mistry said this would add to the supply of competing oilseeds and drag palm prices to new lows in January.

"We're moving into the high production period. People are foreseeing that output will go up in September, followed by a rise in the end-stocks," said a trader with a foreign commodities brokerage.

"It has put a damper on the market. I'm looking at a range of 2,300-2,370 ringgit for the next 1-2 days."

The benchmark November contract on the Bursa Malaysia Derivatives Exchange gained 0.2 percent, to close at 2,349 ringgit ($715) per tonne on Friday, recovering from its intraday low at 2,306 ringgit — a level unseen since Aug 20.

Prices for the week have dropped 3.9 percent, posting their worst weekly performance since end-June.

Total traded volumes stood at 30,848 lots of 25 tonnes each, below the average 35,000 lots.

Technicals showed palm oil looks neutral in a range of 2,323-2,361 ringgit per tonne, and an escape will indicate a direction, says Reuters market analyst Wang Tao.

Malaysian palm oil stocks at end-August stood at 1.67 million tonnes, almost flat from the 1.66 million tonnes at end-July, as healthy consumption for festivals such as the Muslim Eid al-Fitr and China's Mid-Autumn celebrations, offset an increase in output.

Traders, however, say export demand may dwindle, now that the festive season is over.

Cargo surveyors will release export data for the first 15 days of September, next Tuesday. Malaysian markets will be closed on Monday, for the Malaysia Day holiday.

In other markets, Brent crude oil fell below $112 a barrel on Friday, as the U.S. and Russian foreign ministers met in Geneva to work out a deal to avert a Western military strike on Syria, easing fears of a wider war in the Middle East.

In vegetable oil markets, the U.S. soyoil contract for December fell 0.3 percent in late Asian trade. The most-active January soybean oil contract on the Dalian Commodities Exchange edged down 0.4 percent.

Palm, soy and crude oil prices at 1008 GMT

Contract
Month Last
Change Low
High
Volume
MY PALM OIL SEP3
0
+0.00
0
0 0
MY PALM OIL OCT3
2361
+10.00
2320
2365
801
MY PALM OIL NOV3 2349
+5.00 2306 2361 15900
CHINA PALM OLEIN
JAN4 5470
-32.00 5446
5580 528066
CHINA SOYOIL JAN4
7196
-28.00 7172
7304
880074
CBOT SOY OIL DEC3 42.87
-0.16
42.76 43.29
7082
NYMEX CRUDE OCT3
107.57
-1.03
107.31 108.74 18436
Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in U.S. cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
Crude in U.S. dollars per barrel
($1=3.287 Malaysian ringgit)