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Thursday, March 12, 2015

Palm oil slips on waning demand woes, stronger ringgit

Palm oil products continued to decline this month, dropping between 12% and 19%. – The Malaysian Insider pic, March 12, 2015.Palm oil products continued to decline this month, dropping between 12% and 19%. – The Malaysian Insider pic, March 12, 2015.
Malaysian palm oil futures fell on Thursday, reversing gains clocked in the previous session to fall six out of seven days, as the ringgit advanced and investors fretted about waning demand for the tropical oil.
Traders say weaker soyoil prices have narrowed palm's discount to the rival edible oil, prompting price-sensitive buyers to switch to soy instead. Palm olein's discount to soyoil has shrunk to around US$41 (RM150) from US$128 at the start of 2015.
"Right now there's less demand, while production is picking up," said a trader with a commodities brokerage in Singapore.
After recording its worst export volumes since 2007 in February, Malaysian overseas sales of palm oil products continued to decline this month, dropping between 12 and 19% in March 1-10 versus a month ago.
By the midday break, the benchmark May contract on the Bursa Malaysia Derivatives Exchange had lost 1% to RM2,253 (US$611) a tonne, cutting short a rally on Wednesday that had lifted prices to as high as RM2,280.
"Rallies are more of short-covering versus genuine buying," a second palm trader said in Kuala Lumpur.
Total traded volume stood at 12,034 lots of 25 tonnes, just below the average 12,500 lots.      
The Malaysian ringgit meanwhile strengthened to 3.6900 per dollar on Thursday, after sliding to fresh six-year lows of 3.7170 in the previous session.
On the technical front, palm oil may fall to a support at RM2,218 per tonne, as it could have completed a rebound triggered by this level, Reuters market analyst Wang Tao said.
Palm oil traders are keeping watch on a three-day strike in Argentina that began on Wednesday. Argentine farmers, including three of the four largest farming groups in the top soymeal exporter, will halt crop sales aimed at reducing the delivery of grains to port.   
The most active May soybean oil contract on the Dalian Commodity Exchange fell 0.1% in early Asian trade, while the US soyoil contract for May was down 0.1%.
In other markets, Brent crude climbed towards $58 a barrel on Thursday for the second straight session as speculators covered their positions ahead of the April contract's expiry, while a strengthening dollar and a build in US crude stocks capped prices. – Reuters

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