KUALA LUMPUR: Malaysian palm oil futures fell over 1 percent in early trade on Monday, on expectation of higher inventories in October and tracking weakness in crude oil prices.
Palm oil stocks at end-October are forecast to rise to the highest in three years at nearly 3 million tonnes amid a seasonal rise in output and a slip in export demand, according to a Reuters survey.
Inventories are expected to climb for a fifth straight month, rising 14.1 percent from September to 2.90 million tonnes, while exports are forecast to fall 13 percent to 1.41 million tonnes.
Production is expected to rise 5.7 percent to 1.96 million tonnes.
The benchmark palm oil contract for January delivery on the Bursa Malaysia Derivatives Exchange was down 0.7 percent at 2,139 ringgit ($513.20) a tonne at the midday break, heading for a fourth session of decline in five. Earlier in the session, it fell as much as 1.2 percent to 2,128 ringgit.
Trading volumes stood at 8,688 lots of 25 tonnes each at noon. <1FCPO-TOT>
“Estimates for October stock levels are high, so this will continue to put pressure on prices,” said a futures trader in Singapore.
“We will see downward pressure (on prices) until stocks are stable.”
Weak crude oil prices also weighed on the market, said another futures trader. Palm oil prices are impacted by the movements of crude oil, as the edible oil is used as feed-stock to make bio diesel.
Oil prices fell further on Monday as the start to U.S. sanctions against Iran’s fuel exports was softened by waivers that will allow major buyers to import Iranian crude, at least temporarily.
In other related edible oils, the Chicago December soybean oil contract was down 0.04 percent.
The January soybean oil contract on the Dalian Commodity Exchange and the January palm oil contract were both flat around 0515 GMT.
Palm oil prices are affected by movements of other edible oils as they compete for a share in the global vegetable oil market.
Palm oil may end its current bounce in a resistance zone of 2,162-2,182 ringgit per tonne and resume its downtrend, said Wang Tao, a Reuters market analyst for commodities and energy technicals.
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