Crude palm oil futures on Malaysia’s derivatives exchange fell Tuesday as investors cashed in on gains after a recent rally, amid broad-based selling in commodity markets tracking fears China may announce further tightening measures to curb inflation. The benchmark April contract on the Bursa Malaysia Derivatives ended MYR48 or 1.2% lower at MYR3,703 a metric ton, after moving in a MYR3,690-MYR3,743 range. The contract rose to its highest level in more than two weeks Monday.
Prices also declined despite steady export demand.
Outbound sales during the first 25 days in January rose 5.7% from the previous month to 1.06 million tons, according to cargo surveyor Intertek Agri Services.
Another surveyor, SGS (Malaysia) Bhd., said estimates for the Jan. 1-25 period fell 2.1% from the previous month to 1.02 million tons.
The fall in Dalian Commodity Exchange and Chicago Board of Trade soyoil in screen trade dragged palm oil down.
Dalian soybean, palm oil and soyoil contracts fell 0.8%, 1.7% and 1.3%, respectively.
Rival soyoil on e-CBOT fell sharply during Asian trading hours, by 50 points to 56.68 cents a pound at 1004 GMT, its premium over palm oil narrowing to $33/ton compared with around $50/ton last week.
Traders are expected to liquidate risky positions in the next few days, despite supportive fundamentals, due to policy tightening fears in China and with the BMD raising margin rates from Saturday over the Lunar New Year holiday next week to limit volatility.
“The overall weakness in the agri-commodity markets and chart-based indicators are signaling further selling in the palm oil market. The rally could be over for palm oil if the market dips below MYR3,600/ton,” said a senior executive at Kuala Lumpur-based OSK Investment Bank.
The outright margin for CPO futures will increase to MYR8,500 per 25-ton lot from MYR6,500, while the spot month gross margin will rise to MYR9,000 from MYR6,750, for contracts which remain open at the close of business on Friday.
In the cash market, palm olein for February shipment was offered $12.50 lower at $1,252.50/ton, while cash CPO for prompt shipment was offered MYR20 lower at MYR3,800/ton.
The most actively traded rupiah-denominated palm oil contract for April delivery on the Indonesia Commodity and Derivatives Exchange was trading 1.6% lower at IDR10,835/ton at 0947 GMT.
CME Group’s dollar-denominated palm oil contract for April delivery was trading $4 lower at $1,213.25/ton.
Open interest on the BMD was 87,619 lots, versus 85,235 lots Monday. One lot is equivalent to 25 tons.
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