Crude Palm Oil Slumps Amid Selloff; May Pare Losses On Indian Demand
Crude palm oil futures on Bursa Malaysia Derivatives were sharply lower Thursday amid a broad selloff as investors reacted to an increasingly gloomy outlook on global growth after the U.S. Federal Reserve initiated a new program of monetary easing.
Benchmark December contract ended at MYR3,009 a metric ton, a decline of 1.9% from Wednesday’s settlement. The contract earlier fell as much as 2.2% to MYR3,000/ton, the lowest since Sept. 14.
The Fed said Wednesday that it would invest $400 billion in long-term bonds over the next nine months, using money raised by selling its holdings of short-term debt, in a bid to keep interest rates low.
“Spillover selling from declines in CBOT [soyoil] and [on the] DCE added pressure to palm oil futures,” S. Paramalingam, executive director at Kuala Lumpur-based brokerage Pelindung Bestari Sdn. Bhd., said in a note.
An improving outlook on production in Malaysia and price outlooks for vegetable oil markets from an upcoming industry conference in Mumbai this weekend that market participants expect to be bearish weighed further on prices, a trading executive at a Mumbai-based brokerage said.
“The market is desperately trying to hold on to the key support level of MYR3,000 a ton,” a trading executive at a Singapore-based vegetable oil firm said. “A breach below that level will drag CPO lower, toward MYR2,950/ton.”
But bullish traders expect declines to be limited due to buying interest by top vegetable oil consumer India ahead of Diwali next month.
India will import more vegetable oils in the new 2011-12 season following a drop in imports during the 2010-11 period, as local output isn’t rising fast enough to meet booming consumption, Hamburg-based oilseed publication OilWorld said.
In the cash market, refined palm olein for October was offered unchanged at $1,075/ton, while cash CPO for prompt shipment was offered at MYR3,080/ton.
Traded volume on the BMD was 21,958 lots compared with 21,920 lots Wednesday. One lot equals 25 tons.
Open interest was 138,615 contracts compared with 136,326 contracts Wednesday.
Closing BMD Crude Palm Oil (CPO) futures prices in MYR/ton at 1030 GMT:
Month Close Previous Change High Low
Oct'11 3,023 3,077 -54 3,052 3,015
Nov'11 3,011 3,066 -55 3,040 3,001
Dec'11 3,009 3,066 -57 3,041 3,000
Jan'12 3,016 3,070 -54 3,042 3,004
-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233; firstname.lastname@example.org
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