KUALA LUMPUR: Malaysian palm oil futures fell to a three-week low on Thursday on concerns that demand could take a hit from a European Union move to support a ban on the use of palm oil in biofuels, but prices later recovered on a weaker ringgit.
The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange was slightly up 0.04 percent at 2,488 ringgit a tonne at the midday break.
Earlier in the session, it touched 2,462 ringgit, its weakest since Dec. 26.
Trading volumes stood at 25,941 lots of 25 tonnes each at the midday break.
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Traders said prices fell initially after a move by European lawmakers to approve a plan to ban the use of palm oil in motor fuels from 2021.
“There are (also) concerns over high stocks and the lack of demand. There is no bullish news in the market,” said one trader.
Malaysia on Thursday criticised the European Union for backing a ban on the use of palm oil in biofuels, calling the move a protectionist trade barrier and a form of “crop apartheid”.
A large portion of European palm oil imports are used to make biofuels, giving the palm industry a cause for concern as they fear a decline in overall demand.
Another trader said prices later stabilised due to a softer ringgit. A weaker ringgit makes the tropical oil cheaper for holders of foreign currencies.
The ringgit fell by 0.1 percent to 3.9560 against the dollar, giving up some recent gains. The ringgit has gained over 11 percent since the beginning of the year, hitting an 18-month high on Wednesday.
Prices were also supported by forecast for a drop in Malaysia’s palm oil stockpiles.
The Malaysian Palm Oil Board (MPOB) on Thursday said it expects the country’s palm oil stockpiles to drop 15.8 percent to 2.3 million tonnes in 2018.
Palm oil inventories in Malaysia rose to a more-than-two-year high of 2.7 million tonnes at end-December, raising concerns about weak demand levels.
Earlier this month, Malaysia said it would suspend export tax on crude palm oil for three months to curb stockpiles and boost prices.
In other related edible oils, the March soybean oil contract on the Chicago Board of Trade rose as much as 0.2 percent, while the May soybean oil on the Dalian Commodity Exchange slipped up to 0.7 percent.
The Dalian May palm oil contract declined up to 0.7 percent.
Palm oil tracks the performance of other edible oils, as they compete for a share in the global vegetable oils market.
Source: Brecorder.com
