(Reuters) – Malaysian palm oil futures fell to a one-week low on Wednesday as investors continued to take profits after prices surged to one-year highs last week, but the prospect of a drop in production capped losses.
Benchmark prices had their biggest weekly gain in more than four years last week, lifted by strong Asian demand and expectations that Southeast Asian palm oil output has begun to taper off.
Malaysia and Indonesia, which account for about 90 percent of the world’s palm oil supply, should start to see smaller yields of the tropical oil as seasonal monsoon rains roll in.
“There’s some mild profit-taking at this level since margins are lower, but the downside could be limited because a lot of investors are expecting bullish to neutral MPOB numbers,” said a trader with a local commodities brokerage, referring to the Malaysian Palm Oil Board, the industry regulator.
“November’s production could even be lower by 5-8 percent,” the trader added. A drop in output would eat into stocks, which stood at 1.78 million tonnes at the end of September.
The MPOB will release data on Malaysia’s end-October palm oil stocks, exports and output on Nov. 11.
At Wednesday’s close, the benchmark January contract on the Bursa Malaysia Derivatives Exchange had dropped 1.3 percent to 2,547 ringgit ($801) per tonne. Earlier it hit 2,545 ringgit, the lowest since Oct. 30.
Total traded volume stood at 36,225 lots of 25 tonnes each, slightly higher than the average 35,000 lots.
Technicals showed Malaysian palm oil was expected to test support at 2,544 ringgit per tonne and a break below that would lead to a further loss to 2,491 ringgit, said Reuters market analyst Wang Tao.
The weaker Malaysian ringgit also provided some support on Wednesday as it stokes buying interest from overseas buyers. The currency had fallen 0.19 percent to 3.1800 against the U.S. dollar by late trade.
In other markets, Brent oil rose to $106 a barrel, supported by a fall in U.S. oil product inventories and worries about prolonged disruption to supply from Libya as the peak winter heating season looms.
In competing vegetable oil markets, the U.S. soyoil contract for December rose 0.1 percent in late Asian trade. The most active May soybean oil contract on the Dalian Commodities Exchange fell 0.7 percent.
