Palm slips, stretches losses into 6th day as weather woes ease

(Reuters) – Malaysian palm oil futures ended lower for the sixth straight day on Tuesday, stretching its longest losing streak this year, as worries of dry weather eased and weakening demand from top consumers continued to weigh.

“The weather stress is easing, production should be a bit higher this month,” a trader with a foreign commodities brokerage said. “Exports are not picking up yet … the first 15 days (in March) were down quite sharply.”

Cargo surveyors reported that shipments of Malaysian palm products fell 21 percent in the first half of March compared with a month earlier, due to softer demand from major edible oil buyers India and China.

The trader added that the immediate support level for benchmark prices was at 2,700 ringgit, with resistance at 2,800 ringgit.

The benchmark June contract on the Bursa Malaysia Derivatives Exchange had edged down 0.2 percent to 2,736 ringgit ($836) per tonne by Tuesday’s close. Prices earlier touched 2,760 ringgit, but gave up gains after the midday break.

Traded volume stood at 50,203 lots of 25 tonnes, much higher than the average 35,000 lots.

Benchmark prices had surged to an 18-month high of 2,916 ringgit on March 11, but then slipped off the peak and continued to shed gains for five straight days on worries that the rally would shift demand to cheaper competing vegetable oils.

But traders said prices on the first month of the Malaysian palm futures contract are being driven up as demand overwhelms immediate supply of the tropical oil. Unfavourable weather over most of Malaysia had hindered palm yields over the past weeks.

April prices were trading between 2,800 and 2,866 ringgit late on Tuesday.

“Because of the prior dry weather, there is a temporary palm shortage right now. That’s why people are willing to pay a premium price,” another Kuala Lumpur-based trader said.

Technicals show Malaysian palm oil is expected to test resistance at 2,764 ringgit per tonne, as its fall from the March 11 high 2,916 ringgit could have more or less completed, Reuters market analyst Wang Tao said.

Malaysia raised its crude palm oil export tax for April to 5.5 percent, a government circular showed on Tuesday, the first hike after four months. The rate had been kept unchanged at 5 percent since December.

An industry group in top producer Indonesia expects the country’s domestic biofuel sales to soar to about 3 million kilolitres this year from 1 million kilolitres, thanks to a higher blending requirement aimed at burning more palm-based biodiesel.

The Indonesian Biofuel Producers Association (APROBI) added that Indonesia’s total biodiesel capacity is likely to hit 8.8 million kilolitres in 2015, up from 5.6 million kilolitres at present.

In other markets, Brent edged higher above $106 a barrel on Tuesday, with bargain-hunting kicking in after the benchmark fell more than $2 in the previous session as there seemed little likelihood of the Ukraine crisis interrupting Russian oil supplies.

In other competing vegetable oil markets, the U.S. soyoil contract for May fell 0.3 percent in late Asian trade, while the most active September soybean oil contract on the Dalian Commodities Exchange lost about 1 percent.