Palm oil prices fell on Friday

According to David Ng, a Kuala Lumpur-based trader at Iceberg X, the market is likely concerned about rising production and rising inventories ahead of next week’s key crop report, which will reflect overall supply and demand.

Malaysian palm oil futures fell to a nearly three-week low on Friday, marking a second consecutive week of declines amid expectations of rising production and rising inventories.

The benchmark FCPO3 palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange fell 23 ringgit, or 0.51%, to 4,483 ringgit (US$1,102.29) per metric tonne, its lowest since June 15. The contract has fallen 1.86% this week.

Market participants are expecting higher production, which is expected to contribute to rising inventories, while weaker Dalian palm olein futures also weighed on the price, said Anilkumar Bagani, head of commodity research at Sunvin Group.

The most actively traded Dalian soybean oil contract fell 0.43%, while the palm oil contract fell 1.43%. The Chicago Mercantile Exchange is closed for a public holiday.

Palm oil prices are tracking those of competing edible oils as it fights for share in the global vegetable oil market.

A Reuters poll found that Malaysian palm oil inventories likely reached their highest level on record in June, as rising production outpaced demand growth.

However, according to Bagani, the expected shortfall in Indonesian export supplies due to the mandatory use of 50% biodiesel in fuel, as well as talk of a strong El Niño event this season, are mitigating the impact of a sharper price drop.

Oil prices remained stable and virtually unchanged over the week, as traders remained hopeful of success in the Middle East peace talks between the US and Iran.

Higher oil futures prices make palm oil a more attractive feedstock option for biodiesel production.

The ringgit strengthened 0.25% against the dollar, making the commodity slightly more expensive for buyers holding foreign currency.

Tags: palm oil, prices