Malaysian palm oil futures posted a second week of declines on Friday

Malaysian palm oil futures closed lower for a second week on Friday, despite closing higher amid selling pressure caused by weak demand.

Palm oil prices rose, reversing earlier losses. Bargain hunting after the recent pre-weekend price decline may have limited downward pressure, Kenanga Futures wrote in a note. However, analysts believe concerns about demand uncertainty in the coming months due to the strengthening ringgit continue to weigh on market sentiment.

The benchmark FCPO1 palm oil contract for April delivery on Bursa Malaysia rose 13 ringgit, or 0.32%, to close at 4,050 ringgit (US$1,037.13) per metric tonne. For the week, the contract has lost 2.5%.

On Friday, the contract pared its previous losses at the close following news that India’s January palm oil imports rose 51% from the previous month, reaching a four-month high. A steeper discount compared to rival soybean oil prompted refineries to increase purchases of the tropical oil. Meanwhile, soybean oil imports fell to a 19-month low.

Commenting on the weekly losses, a Kuala Lumpur-based trader said, “Selling pressure is mainly driven by the expected slowdown in demand due to a cheaper, alternative, and stronger ringgit, as well as analysts’ moderate outlook for palm oil futures.”

The most actively traded Dalian soybean oil contract fell 0.64% on the day, while the palm oil contract also fell 1.76%. Soybean oil prices on the Chicago Mercantile Exchange fell 0.47%.

Chinese markets will be closed from February 16 to 23 for the Lunar New Year holiday.

The ringgit weakened 0.13% against the dollar, making the commodity cheaper for buyers holding foreign currency.

Malaysia raised its March reference price for crude palm oil, keeping the export duty at 9%, according to a circular published on the Malaysian Palm Oil Council’s website.

Analysts note that Indonesia’s decision to suspend biodiesel production expansion and expectations of increased production in the coming months will likely put pressure on palm oil prices, although strong demand and slower overall production growth could limit price declines.

Tags: prices, Malaysia, palm oil