Palm oil falls back from a 21-month high

Malaysian palm oil futures fell more than 1% on Thursday, retreating from a 21-month high. The December contract on Bursa Malaysia declined by 58 ringgit, or 1.16%, to 4,940 ringgit ($1,206/t).

The market came under pressure from sluggish exports and expectations of higher inventories in Malaysia. Traders estimate that end-September stocks could rise to around 3 mln tons, while Malaysian palm oil exports in the first half of the month fell by 17.8–25.6% m/m.

Weakness in rival edible oils added further pressure. Dalian’s most-active soyoil contract fell 0.34%, while its palm oil contract lost 1.06%. Chicago soyoil declined by around 1.02%.

At the same time, the market is receiving some support from expectations that India may cut import duties on vegetable oils and that Indonesia could raise its biodiesel blending mandate. In addition, palm oil production in Kalimantan could decline by 12–15% in Q4 due to prolonged dry weather and fires.

Lower crude oil prices are also weighing on palm oil, making it less attractive as a biodiesel feedstock. Meanwhile, a weaker ringgit is providing some support by making Malaysian palm oil cheaper for buyers holding other currencies.

Tags: prices, Malaysia, palm oil, futures