Palm oil prices fall amid expectations of weaker demand

Palm oil prices fell, driven by expectations of lower demand due to the conflict in the Middle East, according to a research note from Phillip Capital analysts. The June-delivery derivatives contract on Bursa Malaysia closed 41 ringgit lower at 4,496 ringgit per tonne. Meanwhile, Malaysia’s palm oil exports for March 1-25 are estimated to have risen 51% month-on-month to 1,389,549 metric tonnes, AmSpec Agri Malaysia, a cargo valuation firm, reported on Wednesday.

Malaysian palm oil futures fell to their lowest in two weeks on Wednesday, following lower crude oil prices and a drop in Dalian crude prices, while uncertainty over the prospects for a de-escalation of the Middle East conflict added to the pressure.

The benchmark FCPO1 palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange closed down 41 ringgit, or 0.9%, at 4,496 ringgit (US$1,134.78) per metric tonne.

Lower oil prices and falling Dalian oil prices have weighed on the palm oil market, as sentiment remains largely driven by oil prices rather than fundamentals, said Paramalingam Supramaniam, director of Selangor-based brokerage Pelindung Bestari.

“Everything depends on oil market sentiment and the ongoing negotiations to end the war between Iran and the US,” Supramaniam added.

Oil prices fell about 4% after reports that the United States had sent Iran a 15-point proposal to end the war in the Middle East, raising the prospect of a ceasefire that could ease supply disruptions in the region.

Lower oil futures prices make palm oil a less attractive biodiesel feedstock option.

Weak demand also weighed on prices, with Indian refineries cutting purchases of palm, soybean, and sunflower oils, betting that the war-induced price hike in Iran will not last long, industry officials told Reuters.

The most-active Dalian soybean oil contract fell 0.67%, while the CPO1 palm oil contract fell 1.74%. Soybean oil prices on the Chicago Mercantile Exchange fell 0.09%.

Palm oil prices are tracking the price movements of competing edible oils as it competes for share in the global vegetable oil market.

According to cargo assessment experts, Malaysian palm oil exports increased by 38.4% to 50.6% from March 1 to 25 compared to the previous month.

The ringgit weakened 0.23% against the dollar, making this commodity slightly cheaper for buyers with foreign currency.

Tags: prices, palm oil