Palm oil tracks rival edible oils and crude lower; heads for weekly gain

JAKARTA: Malaysian palm oil futures slipped on Friday, mirroring the decline in rival edible oils and crude oil prices, but were still poised for a weekly increase. The December delivery benchmark palm oil contract on the Bursa Malaysia Derivatives Exchange slipped 30 ringgit, or 0.61%, to 4,906 ringgit ($1,203.93) per metric ton by midday.

This week, the contract has gained 1.91%. A trader in Kuala Lumpur noted that "FCPO futures remained in negative territory on Friday, mirroring the selling pressure across the broader commodity complex during Asian trading hours." The Dalian market's top-soyoil contract declined 1.56%, while its palm oil contract fell 1.64%. Chicago Board of Trade soy oil prices dropped 0.74%.

Palm oil competes with other edible oils for market share and is closely watched as an announcement from the Indian government about potential import tariff cuts looms. This could impact demand for Malaysian palm oil. Market participants are also watching oil prices, which have fallen for three days due to easing concerns over Saudi supply disruptions and the growing Middle East conflict. A lower crude oil price makes palm oil a less attractive biodiesel feedstock.

Indonesia's palm oil production in Kalimantan, the main producing region, could see a 12% to 15% decline in the fourth quarter due to prolonged dry weather and widespread fires. The Malaysian ringgit, the commodity's currency of trade, rose 0.51% against the dollar, making palm oil more expensive for buyers with foreign currencies.

Palm oil futures may test the support level of 4,900 ringgit per metric ton, with a break below this level potentially leading to a range between 4,841 and 4,865 ringgit, according to Reuters technical analyst Wang Tao.