Malaysian Palm Oil Futures Drop Again On Weak Edible Oil Prices
What’s going on here?
Malaysian palm oil futures have fallen for six consecutive sessions, with the benchmark contract dropping by 35 ringgit to 4,473 ringgit per metric ton, impacted by weaker edible oil markets and Indonesia’s planned increase in export levies.
What does this mean?
Palm oil prices are highly linked to movements in other edible oil markets, such as those on Dalian and the Chicago Board of Trade, both facing downturns. This adds pressure on palm oil, which also faces Indonesia’s decision to raise its crude palm oil export levy from 7.5% to 10% to boost biodiesel subsidies. On the flip side, a weaker ringgit makes Malaysian palm oil more appealing to foreign buyers. Yet, weak crude oil futures, exacerbated by fears of slowing demand growth from China, reduce palm oil’s attractiveness as a biodiesel source. A Reuters analyst warns that palm oil might test support at 4,370 ringgit, indicating possible further declines.
Why should I care?
For markets: Edible oil markets taste the sour note.
The decline in palm oil futures is part of a broader weakness across edible oil markets, affecting related commodities globally. Investors should watch these trends along with the dollar’s strengthening position, approaching two-year highs, impacting costs and trade dynamics worldwide. The ongoing focus on US inflation data highlights the significance of these shifts, especially for commodity investors.
The bigger picture: Global economic ripples widen.
Indonesia’s move to alter its export levy underscores a strategic pivot toward biodiesel, echoing global policy trends around alternative energy sources. This scenario unfolds amid weak Asian shares and forthcoming pivotal economic data, like UK retail sales and the US PCE price index, which could further clarify the economic landscape, shaping global markets and trade strategies.
