Palm oil sinks from six-week high on concerns about China demand
Palm oil tumbled from a six-week high following a decline in soybeans and on prospects of weakening demand in China.
Futures for October delivery fell 6.7% to close at RM4,113 a ton after ending last week at the highest level since July 1. Soybeans and soybean oil declined too, after the US Department of Agriculture forecast record domestic soy output.
Palm oil prices are pressured by profit-taking after strong gains last week, said Sathia Varqa, owner of Palm Oil Analytics in Singapore. There is also renewed concern over Chinese demand due to Covid-19 lockdowns, he added.
China’s commitment to Covid-zero means the threat of repeated restrictions and reopenings continues to loom. August saw a surge in cases on the resort island of Hainan, where authorities have locked down holidaymakers, suspended flights, and shut businesses to contain infections.
Malaysian palm oil exports, a gauge of overseas demand, are showing signs of weakening. Shipments climbed 2.8% in the first half of August from the previous month, slowing from a 10.5% increase in the Aug 1-10 period, according to Intertek Testing Services.
Production and stockpiles are expected to rise in top growers Indonesia and Malaysia, which will likely weigh on prices, said Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental.
The prospects for increasing sunflower oil supplies could also be bearish, he added. Two grain-loaded ships were authorised to leave Ukraine ports on Aug 13, including one carrying sunflower seeds for delivery to Turkey.
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