Thursday, August 4, 2011

Palm oil slips on economic jitters, comparative oils

JAKARTA: Malaysian palm oil futures traded lower on Thursday, Aug 4 tracking comparable vegetable oils lower on persistent global economic jitters and crude prices that flirted with one-month lows.

The benchmark October contract on the Bursa Malaysia Derivatives Exchange traded down 0.6 percent at RM3,116(US$1,048) per tonne, but off an earlier low of RM3,106.

Traded volumes for the contract were 4,460 lots of 25 tonnes each, compared to 9,607 lots on Wednesday.

"We have seen a lot of bearish pressure across the board, linked to the big macroeconomic picture in the United States, plus the fact that crude is slightly cheaper," said Abah Ofon, a Singapore-based analyst at Standard Chartered Bank.

The latest figures continued to paint a sombre picture for the U.S. economy, with the pace of growth in the services sector falling in July to its lowest since February 2010, while new U.S. factory orders also fell in June.

The reports followed poor figures on U.S. consumer spending and factory activity. That, along with the festering European debt crisis, is likely to keep buyers cautious.

The yen fell on Thursday after intervention by Japanese authorities, though investors steered clear of riskier assets, uncertain if the European Central Bank would join the fray by increasing bond purchases to fight a crisis of confidence.

Ofon added that further price pressure in August may come from a build-up of stocks in Indonesia ahead of an expected change in the export tax rate later this month.

Indonesia, the world's biggest palm oil producer and exporter, could lower the maximum export tax rate in August.

Ofon forecasts second half benchmark prices to average RM3,400.

In comparable markets, U.S. soybeans for November delivery eased, while the most active May 2012 soyoil on China's Dalian Commodity Exchange also dipped.

'Sluggish U.S. soyoil due to a weak global economy and favourable crop weather in U.S. soybean planting regions pressured China's soyoil market," said Zhan Zhi Hong, an oil analyst with Shenzhen-based China Merchant Futures.

"Choppy trade will continue in China's soyoil if U.S. markets fail to set a clear and strong direction," she added.

This week, benchmark palm oil prices have been supported by rising export data, leading to a near two-week high of RM3,144 on Thursday.

Exports of Malaysian palm oil products for July jumped 13.5% to 1,628,688 tonnes, cargo surveyor Societe Generale de Surveillance said on Monday.

Traders also say that the fasting month of Ramadan will also lead to lower output in Indonesia and Malaysia, the top two global palm producers.

On Thursday, a leading agronomist said Southeast Asian palm oil output growth will slow in the second half of 2011 as the impact of El Nino weather conditions from two years ago manifests with lower oil-yielding palm fruits.

Crude oil posted a modest rebound from one-month lows on Thursday, tracking a bounce in Asian stock markets ahead of key U.S. employment reports.

On the economic calendar, investors are eagerly awaiting'' July's U.S. non-farm payroll number, due Friday, and updated USDA crop forecasts due to be released on Aug 11. - Bernama


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