Malaysian palm oil down 1.03% on heightened concerns over demand

Malaysian palm oil futures reversed early gains on Thursday, as heightened concerns over demand and forecasts of better production eclipsed worries that the coronavirus pandemic could choke off global supplies of the vegetable oil.

The benchmark palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange was down 24 ringgit, or 1.03 per cent, at 2,315 ringgit ($528.90) per tonne by the midday break. The contract marked its third session of losses on Thursday.

In the previous session, palm dived 2.6 per cent on mounting worries over a plunge in global demand as more countries are under shutdown orders to curb the spread of the pandemic.

"The Southern Palm Oil Millers Association has estimated a 4 per cent increase in palm oil production. This may lead to a 5-8 per cent increase in Malaysia’s palm oil production in March," said Anilkumar Bagani, research head of Sunvin Group.

Palm oil found support in early trade on expectations of a supply disruption as Malaysia shut down some plantations due to the coronavirus, Bagani added. The market is also monitoring whether Indonesia, the world’s largest palm oil producer, will impose a lockdown after declaring a public health emergency over the coronavirus epidemic on Tuesday.

China’s ports and shipping firms are bracing for a deeper and more prolonged supply chain disruption in the world’s second-largest palm buyer as the global spread of the virus chokes international demand. Dalian’s most-active soyoil contract fell 0.6 per cent, while its palm oil contract slipped 0.5 per cent. Soyoil prices on the Chicago Board of Trade firmed 0.35 per cent. Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

Crude oil futures jumped nearly 5 per cent in early trading on Thursday after US President Donald Trump said he expected Saudi Arabia and Russia to reach a deal in the next few days to end their oil price war.

Stronger crude oil futures make palm a more appealing option for biodiesel feedstock.

Palm oil is biased to break a support at 2,327 ringgit per tonne, and fall towards 2,253 ringgit, Reuters technical analyst Wang Tao said.