Malaysian palm oil futures experienced a decline, with the benchmark June contract dropping 49 ringgits, or 1.13%, to 4,279 ringgit ($957.91) per metric ton in early trade.
Factors Contributing to the Decline:
- Weakness in Rival Edible Oils: The decrease in palm oil futures was influenced by significant drops in soyoil prices on both China's Dalian Commodity Exchange and the Chicago Board of Trade (CBOT). Specifically, Dalian's most-active soyoil contract fell by 2.74%, while its palm oil contract shed 4.2%. CBOT soyoil prices were down 0.89%.
- Lower Crude Oil Prices: Palm oil prices often track crude oil trends due to their use in biodiesel production. A decline in crude oil prices can reduce the attractiveness of palm oil as a biodiesel feedstock, exerting downward pressure on its prices.
- Market Sentiment and Profit-Taking: Analysts noted that the decline in palm oil futures was also due to profit-taking activities among traders, influenced by broader market sentiments and recent price movements.
Currency Impact:
The Malaysian ringgit depreciated by 0.79% against the U.S. dollar, making palm oil more affordable for foreign buyers and potentially cushioning the price decline.
Despite the current downturn, some market analysts anticipate that palm oil prices may stabilize in the coming months. This expectation is based on projected increases in demand during April and May, coupled with rising production levels, which could help maintain positive market sentiment.
In summary, the recent decline in Malaysian palm oil futures is attributed to the combined effects of weaker rival edible oil prices, lower crude oil prices, and profit-taking activities. However, currency fluctuations and anticipated demand increases may influence future price movements.
