SINGAPORE, Mar 26: Malaysian palm oil futures edged lower on Tuesday in rangebound trading amid concerns over lower export demand, while worries about the potential impact of a Cyprus bailout scheme also dented investor appetite for riskier assets.
While Cyprus’s deal with international lenders to shut down the country’s second largest bank in return for 10 billion euros in rescue funds removed the immediate risk of a financial meltdown, it also stoked fears of similar tough conditions for future bank rescues in the euro zone.
Palm oil came under more pressure as Malaysian exports fell by 7.5 percent for March 1 to 25 compared to a month ago due to a slowdown in crude palm oil shipments.
‘The market is stuck and it’s looking for further direction. We are looking at 2,400 ringgit for support,’ said a trader with a local commodities brokerage in Malaysia.
By the midday break, the benchmark June contract on the Bursa Malaysia Derivatives Exchange had lost nearly 1 percent to 2,438 ringgit ($788) per tonne. Prices traded in a tight range from 2,436 to 2,452 ringgit.
Total traded volume stood at 6,329 lots of 25 tonnes each, much thinner than the usual 12,500 lots as most investors were waiting for further trading cues.
Market players are counting on seasonally slower production in Malaysia, the world’s second-largest palm producer, to bring stocks down this month.
Inventory level stood at 2.44 million tonnes in February with leading analyst Dorab Mistry forecasting a drop below 2 million tonnes in June.
Traders are also looking out for export data for the full month to see if demand is strong enough to offset imports and production. A surprise drop in shipments for the first 25 days of March due to lower exports to major buyers Europe and India may continue to weigh on the market.
In other markets, Brent slipped towards $108 a barrel on concerns the Cyprus bailout could set a new precedent in restructuring the euro zone banking sector, again raising worries about the European economy and its oil demand.
In other vegetable oil markets, U.S. Soyoil for May delivery edged down 0.2 percent in early Asian trade. The most-active September soybean oil contract on the Dalian Commodities Exchange fell 0.2 percent.
(agencies)
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