by BLOOMBERG / pic by TMR FILE
JAKARTA • Palm oil declined amid prospects for weakening demand from India, the top buyer, where large parts of the nation remained under local lockdowns to fight the world’s worst outbreak of Covid-19.
Futures for August, the contract with the highest volume, fell 1.1% to close at RM4,240 per tonne, the lowest since May 11. The market was closed last Thursday and Friday for the Aidilfitri holiday.
Despite data showing that Malaysia’s palm oil exports to India doubled in the first 15 days of May from a month ago, there’s doubt whether the momentum could be sustained given the lack of seasonal demand and ongoing coronavirus restrictions in India, according to Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental Pte Ltd.
“During lockdowns, household demand for sunflower oil and soybean oil rises in India. Palm oil is mostly used in restaurants, which are all closed,” he said.
Some traders who held long positions before the holiday also took profit as the market reopened, Thiagarajan added, predicting that the August contract could trade between RM3,900 and RM4,300 a tonne this week.
There are still supportive factors for tropical oil. Soybean oil in Chicago, which competes with palm oil, is holding near the highest since 2008 even as crop prices such as corn and wheat tumbled. This may be due to rising use of soybean oil in biodiesel, which the US Department of Agriculture forecast will be 26% higher in the 2021-2022 season than it was a year earlier.
Robust exports from Malaysia and expectations of a slower increase in production may also aid palm oil prices later on, said Dr Sathia Varqa, owner of Palm Oil Analytics in Singapore.