MUMBAI, 5 Aug (Commoditiescontrol): Malaysian crude palm oil (CPO) futures plummeted over 3% on Monday, reaching their lowest closing price in six months due to declining crude oil prices and a strengthening ringgit. The benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange fell 129 ringgit, or 3.29%, to close at 3,788 ringgit ($857.01) per metric ton, the lowest since February 2. This follows a 0.63% decline last week, marking the second consecutive weekly drop.
CPO futures experience steep decline reflecting nervous financial markets, while Ringgit appreciates significantly and stocks show notable increase, a trader said.
A broader downturn in global equity markets has fueled negative sentiment, exerting pressure on commodity prices, according to a trader based in Mumbai. "The drop in crude oil prices, driven by recession fears in the U.S., has raised concerns about palm oil demand for biofuels," the trader explained. On Monday, oil futures extended their losses amid recession fears in the U.S., the top oil consumer, offsetting supply concerns from rising tensions in the Middle East, the world's largest oil-producing region. By 1002 GMT, Brent crude futures had dropped 1.90% to $75.35 per barrel, making palm oil less attractive as biodiesel feedstock.
The ringgit, the currency used for trading palm oil, appreciated by 1.67% against the dollar, making the commodity more expensive for buyers using foreign currencies. Concurrently, Dalian's most-active soyoil contract decreased by 0.39%, and its palm oil contract by 0.23%, while soyoil prices on the Chicago Board of Trade fell by 1.47%. Palm oil prices typically follow the movements of rival edible oils, as they vie for a share of the global vegetable oils market.
Palm oil stocks in Malaysia, the world's second-largest producer, were estimated at 1.80 million metric tons, a 1.17% decrease from the end of June. Exports of palm oil products surged by 26.1% month-on-month to 1.52 million tons, while crude palm oil production in July increased by 12.7% to 1.82 million tons from the previous month. The Malaysian Palm Oil Board is set to release its monthly palm oil data on August 12.
(By Commoditiescontrol Bureau; +91 98201 30172)
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