Palm slides to over 7-week low on stock fears

Malaysian palm oil futures plummeted over 2% on Friday, hitting their lowest point in over seven weeks due to expectations of increased output and declining exports that could swell inventories. The December December delivery benchmark palm oil contract on the Bursa Malaysia Derivatives Exchange fell 99 ringgit, or 2.07%, to 4,673 ringgit ($1,148.16) per metric ton, the lowest closing since August 3.

The contract dropped 4.59% this week after climbing 1.74% the previous week. Despite India’s reduction in import duty for edible vegetable oils, including palm oil, crude palm oil futures remained pessimistic, as noted by Anilkumar Bagani, research director at Mumbai-based vegetable oil broker Sunvin Group. The anticipation of higher-than-expected Malaysian palm oil production and weak exports has sparked worries that Malaysian stocks could surpass 3.1 million tons by month-end, according to Bagani.

India's government slashed its basic import duty on crude and refined edible oils, such as palm, soy, and sunflower oils, aiming to reduce prices during the busy holiday season. With rising inventories in Malaysia and sluggish buying by India, the world's largest palm oil importer, and the looming effects of El Niño yet to be felt, palm oil prices are expected to stay under pressure, according to industry experts.

Palm oil prices are also likely to drop as markets grapple with the potential US-Iran nuclear deal and the looming threat of Houthi attacks against Saudi Arabia's oil infrastructure. Palm oil's price movements mirror those of other edible oils, as it competes for a slice of the global vegetable oil market. The Malaysian currency's strengthening by 0.34% against the US dollar makes the commodity marginally pricier for foreign buyers.