Malaysian palm oil prices decline on expectations of higher stocks

Malaysian palm oil futures ended Friday slightly lower, pressured by expectations of rising inventories and sluggish export demand. The benchmark October contract on Bursa Malaysia fell by 8 ringgit, or 0.17%, to 4,678 ringgit ($1,144.32) per ton. Despite the decline, prices gained 0.75% over the week, marking their fourth weekly increase in five weeks.

Expectations of further growth in Malaysian palm oil inventories, combined with weak forward export sales, are weighing on the market. According to a Reuters survey, the country’s palm oil stocks may have risen to a five-month high in July as production growth outpaced demand.

The market is awaiting new data on August 10, when the Malaysian Palm Oil Board is scheduled to release its July production, inventory and demand figures. Cargo surveyors are also expected to publish estimates of Malaysian palm oil exports for August 1-10 on the same day. The figures could provide fresh direction for prices after several weeks of predominantly positive performance.

Palm oil received some support from higher crude oil prices amid concerns over the situation in the Strait of Hormuz and possible Iranian restrictions on vessels it considers hostile or in violation of proposed rules. Higher crude oil prices tend to improve palm oil’s competitiveness as a feedstock for biodiesel production.

Movements in rival vegetable oil markets were mixed. The most-active soyoil contract on the Dalian exchange gained 0.27%, while palm oil declined by 0.3%. Chicago soyoil futures rose 0.25%. A slight weakening of the Malaysian ringgit against the U.S. dollar could also support exports by making palm oil somewhat cheaper for foreign buyers.

Tags: prices, palm oil