Vegoils Palm oil falls on worries of overwhelming supply

by **Cals** Sat 04 Jan 2014, 01:32

Vegoils Palm oil falls on worries of overwhelming supply

Business & Markets 2013

Written by Reuters

Friday, 03 January 2014 18:34

KUALA LUMPUR (Jan 3): Malaysian palm oil futures ended lower in tight trade on Friday as investors feared that surging supplies of the tropical oil will overwhelm global demand and weigh on prices.

Indonesia, the top producer, said its 2013 palm oil output likely grew to 24.4 million tonnes from 23.5 million tonnes a year ago, due to "an expansion in plantation areas and better weather conditions".

Output in 2014 is seen rising further, to 28 million tonnes, its agriculture ministry said on Friday.

Malaysia, the No. 2 producer, expects its production to hit a record 19.4 million tonnes in 2013 and inch up to 19.5 million tonnes in 2014.

"The main reason palm oil dropped today is because of the Indonesian output news," said a trader with a foreign commodities brokerage.

The benchmark March contract on the Bursa Malaysia Derivatives Exchange had edged down 0.3 percent to 2,640 ringgit ($802) per tonne by Friday's close. Prices traded in a range of 2,625 to 2,644 ringgit.

Total traded volume stood at 21,029 lots of 25 tonnes, below the average 35,000 lots.

Crude palm oil could face increased competition from rival oilseeds that are slated to churn out bumper crops this year.

Technical selling added to the drag on prices, traders said.

"The market has also been up for a number of days before the New Year. So there's some technical correction, but prices are still rangebound," the Kuala Lumpur-based trader added.

Better-than-expected exports in December and warnings of floods over a palm-growing region in Borneo pushed up palm prices by 0.3 percent this week -- their third straight weekly rise -- although demand worries capped gains.

Technicals showed that a bearish target at 2,620 ringgit per tonne remains unchanged for palm oil, as it has broken below a support at 2,639 ringgit, Reuters market analyst Wang Tao said.

In other markets, Brent crude rose above $108 a barrel after posting its biggest daily percentage drop in six months in the prior session, but expectations for a rise in Libyan supply and speculation of a build-up in U.S. stockpiles capped gains.

In other competing vegetable oil markets, the U.S. soyoil contract for March rose 0.2 percent in late Asian trade.

The most active May soybean oil contract on the Dalian Commodities Exchange fell 1.1 percent.

Palm, soy and crude oil prices at 1011 GMT

Contract        Month    Last   Change     Low    High Volume
MY PALM OIL      JAN4    2606   -13.00    2605    2608      78
MY PALM OIL      FEB4    2630    -9.00    2616    2633    2060
MY PALM OIL      MAR4    2640    -9.00    2625    2644   11162
CHINA PALM OLEIN MAY4    6068   -48.00    6036    6118 529516
CHINA SOYOIL     MAY4    6822   -76.00    6812    6880 538488
CBOT SOY OIL     MAR4   38.87    +0.07   38.79   39.10    4458
NYMEX CRUDE      FEB4   95.31    -0.13   95.13   95.74   14294

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=3.29 Malaysian ringgit)