Palm hits over 5-week low on rising stock expectations, subdued demand

Malaysian palm oil futures dipped to a more than five-week low on Tuesday, driven by a combination of rising stock expectations and limited demand as traders anticipated the upcoming US-China summit. The December delivery palm oil contract on Bursa Malaysia Derivatives Exchange declined by 47 ringgit, or 0.97%, to 4,810 ringgit ($1,180.66) a metric ton, the lowest closing since August 14.

Sandeep Singh, the director of Kuala Lumpur-based consulting and trading firm The Farm Trade, noted that the US-China meeting is providing support to agricultural commodities, particularly soyoil. However, concerns remain regarding El Nino-linked risks throughout the middle of next year. Despite the drop in prices, Malaysia's ending stocks are expected to surpass 3 million tons, potentially reaching record highs.

The subdued demand for palm oil is also contributing to the decline, as spot availability remains a significant factor. Meanwhile, Dalian's most-active soyoil contract increased by 0.54%, while palm oil slumped by 0.49%. Soyoil prices on the Chicago Board of Trade slipped by 1.32%. Palm oil's price movements are influenced by those of other edible oils, as it competes for a portion of the global vegetable oils market.

Cargo surveyors estimated that Malaysian palm oil exports from September 1 to 20 experienced a decline ranging from 12.8% to 24.7% compared to the previous month. Oil prices dropped after Iran's announcement that it could reopen the Strait of Hormuz within a week if the US takes initial steps to reduce military pressure, easing worries about disruptions to a critical global oil shipping route.

Palm oil prices are projected to stay above $1,154 per metric ton through October and the remainder of the year, driven by weather uncertainties and favorable energy markets, according to the Malaysian Palm Oil Council.