(Reuters) – Malaysian palm oil futures ended lower on Tuesday, snapping two days of gains, after weaker-than-expected exports in January fuelled concerns that stockpiles in the world’s second-largest producer will continue to climb.
Cargo surveyor data showed that exports of Malaysian palm oil products in January fell 11 percent compared to a month ago as India, the world’s biggest edible oil consumer, cut back purchases of the tropical oil.
“Exports are bad. It is not helping the market at all,” said a trader with a local commodities brokerage. Market players, however, expect demand to pick up from March onwards as the northern winter recedes and buyers begin re-stocking ahead of the Eid al-Fitr festivities.
The benchmark April contract on the Bursa Malaysia Derivatives Exchange inched down 1.2 percent to 2,528 ringgit ($761) per tonne by Tuesday’s close.
Volumes were also thin due to the Lunar New Year holidays with many investors still away, making prices prone to swings. Total traded volume stood at only 24,585 lots of 25 tonnes compared to the average 35,000 lots.
Technicals were bullish. Malaysian palm oil may rise to 2,581 ringgit per tonne, driven by a wave c, said Reuters market analyst Wang Tao.
Investors are also keeping an eye on dryness in Brazil, projected as the world’s biggest soy supplier. The harvest of a likely record-large Brazilian soybean crop is under way but crops are still developing in some areas.
Larger supplies of soybeans for crushing could lower soyoil prices and channel food and fuel demand away from palm, a competing vegetable oil.
“The wild card is going to be Brazil. Earlier we were looking at a bumper crops, but now certain areas are hot and dry. If these dry spells continue, we won’t have a bumper harvest,” the Malaysian-based trader added.
“But assuming there are rains, then the entire scene will change, and sellers will be back into the market. It’s very mixed now.”
In other markets, Brent hovered around $106 a barrel on Tuesday as a frigid winter boosted heating oil demand in Europe and the United States, offsetting weak U.S. and Chinese economic data.
In other competing vegetable oil markets, the U.S. soyoil contract for March fell 0.2 percent in late Asian trade. The Dalian Commodities Exchange is closed for the Lunar New Year and will re-open on Feb. 7.
