Palm oil closes lower on waning strength of rivals

Malaysian palm oil futures surrendered earlier gains to reverse a two-day climb on Wednesday amid waning strength in soyoil and crude oil, while a stronger ringgit further weighed on investor sentiment.

The benchmark palm oil contract FCPOc3 for July delivery on the Bursa Malaysia Derivatives Exchange closed down 28 ringgit, or 0.71%, at 3,943 ringgit ($825.76) a metric ton.

Dalian’s most-active soyoil contract DBYcv1 and palm oil contract DCPcv1 closed afternoon trade higher at 0.92% and0.86%, respectively. Soyoil prices on the Chicago Board of Trade BOcv1 fell 0.59%.

Soybeans, used to derive soyoil, edged down as dealers assessed prospects for U.S. planting weather this week.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

Oil prices were stable above $88 a barrel on Wednesday, after industry data showed a surprise drop in U.S. crude stocks last week and a drop in business activity from the world’s largest oil consumer.

Brent crude futures LCOc1 fell 31 cents, or 0.35%, to $88.11 a barrel. U.S. West Texas Intermediate crude CLc1 futures lost 36 cents, or 0.43%, to $83 a barrel at 0950 GMT. [O/R]

Weaker crude oil futures make palm a less attractive option for biodiesel feedstock.

The Malaysian ringgit MYR=, palm’s currency of trade, strengthened 0.06% against the dollar. A stronger ringgit makes palm oil less attractive to foreign currency holders.

Malaysian oil palm smallholders have been urged to replant old oil palm trees, which would maintain the productivity of the country’s oil palm industry, Malaysia-based Bernama reported on Monday.

Malaysia’s meterological agency increased the issuance of Level 1 hot weather alerts to over 20 areas on Tuesday evening. Hot weather negatively affects palm yields.

Tags: Malaysia, soyoil, palm oil, futures, benchmark contract