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Malaysian palm oil price closes lower, ending 6-day rally
SINGAPORE: Malaysian palm oil futures retreated after touching a 19-month high earlier on Thursday, as the ringgit gained and as panic buying emerged due to an expected supply shortage died down.
The benchmark palm oil contract for January delivery on the Bursa Malaysia Derivatives Exchange closed 0.4% lower at 2,485 ringgit ($595) per tonne, ending a six-session rally.
The firm ringgit coupled with the view that the contract had been overbought triggered the downturn in late trade, a Kuala Lumpur-based trader told Reuters.
The ringgit rose as high as 0.2% against the dollar on Thursday, making the edible oil more expensive for holders of foreign currencies.
This comes after palm saw its biggest weekly jump in nearly three years as rival oils clocked record highs.
Prices rallied over the past week on expectations that consumption will surge thanks to Indonesia and Malaysia’s push for biofuel, as well as rumours of declining supply.
“We are of the view that the 13% rise in crude palm oil price to RM2,496 per tonne over the past two weeks could have been driven by panic buying due to concerns of a potential palm oil supply shortfall,” CGS-CIMB Securities analyst Ivy Ng said in a note to clients.
Malaysia said last week that implementation of its neighbours’ biofuels mandates will boost annual consumption, and Malaysia and Indonesia would challenge a European Union law to limit palm oil use in biofuels.
But the price rally may affect the ability to fund the mandates, Ng said.
Meanwhile, Dalian’s January palm oil contract closed up 0.4% on Thursday, while Dalian’s soyoil contract fell 0.4%.
Elsewhere, U.S. soyoil futures on the Chicago Board of Trade were 0.5% higher. Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market. – Reuters