SINGAPORE: Malaysian palm oil futures edged lower on Tuesday, tracking weaker overseas soybean oil markets, although a fall in palm oil stockpiles helped keep losses in check.
US soybeans dropped on Tuesday after data from the US Department of Agriculture showed slower export demand for the oilseed, also weighing on soybean oil markets.
US soyoil for May delivery edged down 0.8 per cent in late Asian trade, while the most active September soybean oil contract on the Dalian Commodity Exchange fell 1.1 per cent, extending losses to its lowest since July 2010.
"The palm market is weaker on the back of CBOT and Dalian soybean oil but it should be supported at RM2,400," said a trader with a foreign commodities brokerage in Malaysia.
"Production should go down further and exports should be slightly better than last month, so we expect to see further drawdown in stocks."
By Tuesday’s close, the benchmark May contract on the Bursa Malaysia Derivatives Exchange had inched down 1.6 per cent to RM2,412 per tonne. Prices traded in a range between RM2,406 and RM2,442.
Total traded volume stood at 39,868 lots of 25 tonnes each, higher than the usual 25,000 lots.
Technicals showed palm oil is expected to retrace to RM2,390 per tonne, as it did not break a resistance zone of RM2,450 to RM2,476, Reuters market analyst Wang Tao said.
But despite short-term weakness, analysts expect prices to pick up, as palm oil stocks continue to ease on lower production and a demand recovery.
"We continue to expect crude palm oil prices to trade higher in the coming months. After the current low-yield season, palm oil closing stocks are expected to continue to trend lower on demand recovery, boosted by an abnormally high discount to soybean oil," Malaysia’s Affin Investment Bank said in a research note on Tuesday.
Palm oil stocks in the world’s second-largest producer of the tropical oil fell to 2.44 million tonnes in February from 2.58 million in January, industry regulator the Malaysian Palm Oil Board said on Monday.
Cargo surveyors reported growth in exports to be almost flat for the March 1-10 period from a month ago, and traders will be looking out for export data for the first half of the month, due on Friday, to further gauge the demand trend.-- Reuters