The benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange fell by 45 ringgit, or 1.15%, to 3,872 ringgit ($882.00) per metric ton by midday. This decline marks a second consecutive weekly drop, with the contract having decreased by 0.63% last week.
The broader downturn in global equity markets has created a negative sentiment, impacting commodity prices. A Mumbai-based trader noted that the falling crude oil prices, influenced by recession fears in the United States, have intensified concerns about palm oil demand for biofuels.
Crude oil prices remained near eight-month lows on Monday as recession fears in the U.S., the world’s largest oil consumer, overshadowed concerns about potential supply disruptions due to rising tensions in the Middle East. Brent crude futures fell 0.48% to $76.44 per barrel by 0533 GMT. Lower crude oil prices reduce the attractiveness of palm oil as a biodiesel feedstock.
Despite the drop in palm oil prices, the Malaysian ringgit strengthened by 2.2% against the dollar, which makes the commodity more expensive for buyers using foreign currencies.
In other markets, Dalian’s most-active soyoil contract fell by 0.34%, while its palm oil contract increased slightly by 0.03%. Soyoil prices on the Chicago Board of Trade decreased by 0.07%.
Palm oil prices are influenced by movements in rival edible oils, as they compete for market share in the global vegetable oils market.
According to a survey released on Monday, palm oil inventories in Malaysia are expected to decrease in July for the first time in four months. Stocks were projected to be at 1.80 million metric tons, down 1.17% from the end of June. Exports of palm oil products were estimated to rise by 26.1% month-on-month to 1.52 million tons. Additionally, crude palm oil production in July was forecasted to be 1.82 million tons, reflecting a 12.7% increase from the previous month.
The Malaysian Palm Oil Board is set to release its monthly palm oil data on August 12.
Technical analyst Wang Tao has predicted a potential rebound in palm oil prices to 3,953 ringgit per metric ton, citing that the market has broken through a resistance level at 3,913 ringgit.
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