Price of palm oil fell on Friday

Kenanga Futures analysts noted in a research note that some investors may be taking profits after this week’s significant gains. A renewed escalation of tensions in the Middle East could also destabilize investors, although higher oil prices during Asian trading hours could help mitigate the impact of the decline, they noted.

Malaysian palm oil futures closed at a three-week low on Friday, posting a second consecutive weekly decline, as weaker competitors such as Dalian oil weighed on the market and attention focused on supply and demand data from the Palm Oil Council, due next week.

The benchmark FCPO1 palm oil contract for July delivery on the Bursa Malaysia Derivatives Exchange fell 43 ringgit, or 0.95%, to 4,498 ringgit (US$1,148.03) per metric tonne, its lowest close since April 17. The contract has fallen 1.58% this week.

The market is largely in consolidation mode pending the release of data from the Malaysian Palm Oil Board (MPOB), said Paramalingam Supramaniam, director of brokerage Pelindung Bestari.

The MPOB is expected to release its monthly supply and demand data on Monday.

“The market is forecasting ending stocks to remain within market expectations of 2.3-2.5 million metric tons, and any significant deviation from this range will likely determine the market’s next direction,” Supramaniam said.

Hedging factors include the divergence between prices of competing edible oils and crude oil, which palm oil tracks.

The most active soybean oil contract in Dalian fell 1.26%, while the palm oil contract CPO1 fell 0.85%. Soybean oil prices on the Chicago Mercantile Exchange rose 0.5%.

Palm oil competes with other edible oils for share of the global vegetable oil market.

Oil prices pared their initial gains the day after renewed fighting near the Strait of Hormuz, raising fresh questions about the ceasefire between the United States and Iran.

Strengthening oil futures make palm oil a more attractive biodiesel feedstock option.

The ringgit weakened 0.28% against the dollar, making the commodity slightly cheaper for buyers holding foreign currency.

Tags: prices, palm oil