Malaysian palm oil futures edged down on Thursday, snapping four straight days of gains, as investors booked profits from prices that hit near two-month highs in the previous session while a stronger ringgit curbed buying interest from overseas buyers.
But optimism that stocks in Malaysia, the world’s second-largest producer, might remain below a two-million-tonne mark this year capped losses and kept prices in a tight range of RM2,455-RM2,468.
Market players are betting that output in October, typically the highest-producing month of the year, has lost steam.
Growers’ estimates show production during October 1-20 could have dropped by 10.5 per cent, quelling initial fears that Malaysian output would surge towards the end of the year and cause a stock buildup.
"The market was overdone yesterday, so there’s some profit-taking today," said a trader with a foreign commodities brokerage in Kuala Lumpur.
"Also, the ringgit has strengthened a bit compared to yesterday. Palm’s resistance is at RM2,500, and the immediate support is at RM2,45," the trader added.
The Malaysian ringgit advanced as much as 0.7 per cent to 3.1460 per dollar early Thursday as some investors hoped the government may deliver measures to improve the fiscal deficit at the country’s Budget 2014 announcement.
By the mid-day break, the benchmark January contract on the Bursa Malaysia Derivatives Exchange had dropped 0.7 per cent to RM2,464 per tonne.
Total traded volume stood at 19,596 lots of 25 tonnes each, higher than the usual 12,500 lots.
Technicals showed Malaysian palm oil is expected to seek a support at RM2,449 per tonne before retesting a resistance at RM2,491, Reuters market analyst Wang Tao said.
Weak crude oil prices also weighed on palm, as it shifts demand away from tropical oil as an alternative biodiesel feedstock.
Oil prices have dropped following a steep run up in US crude oil inventories, showing there was ample supply in the world’s largest oil consumer.
US crude for December delivery inched up 61 cents to US$97.47 on Thursday, after ending at US$96.86 a barrel in the previous session, the lowest settlement price since July 1.
Demand for Malaysian biodiesel products could pick up in the next few months after European Union member states agreed to impose higher duties on biodiesel imported from Indonesia and Argentina from November onwards.
The European Commission has proposed duties between 217 and 246 euros (US$300-US$340) per tonne on biodiesel imports from Argentina and between 122 to 179 euros a tonne on imports from Indonesia, figures seen by Reuters showed.
This will make Malaysian biodiesel more attractive to European buyers at least until the end of the year before Malaysia loses its Generalised Scheme of Preferences (GSP) — an EU benefit that provides tax reductions.
Malaysia has exported about 123,000 tonnes of biodiesel so far this year, according to data from the Malaysian Palm Oil Board, nearly five times the total amount sold for the whole of 2012.
In competing vegetable oil markets, the US soyoil contract for December fell 0.2 per cent in early Asian trade, while the most-active January soybean oil contract on the Dalian Commodities Exchange was flat.-- Reuters