Palm Oil Drops to Lowest Level This Year on Crude Price Decline

By Swansy Afonso 

Palm oil fell to the lowest level this year as a slide in crude oil prices dimmed the demand prospects for the tropical oil as a feedstock for biofuels.

The contract for July delivery fell as much as 0.4 percent to 2,265 ringgit ($747) a metric ton on the Bursa Malaysia Derivatives and was little changed at 2,276 ringgit at 12:19 p.m. in Kuala Lumpur. Futures have lost 6.9 percent this year and are headed for a 3.2 percent drop this week.

Brent crude continued to trade below $100 a barrel and West Texas Intermediate crude traded near the lowest level in four months as U.S. fuel use declined and production climbed to a two-decade high. Exports from Malaysia, the second-biggest producer, fell 4 percent to 648,275 tons in the first 15 days of April from the same period in March, Intertek said April 15.

“Crude oil’s decline is impacting the market sentiment and a sharp drop in prices will see a stronger impact on bio-diesel demand,” said Gnanasekar Thiagarajan, a Mumbai-based director at Commtrendz Risk Management Services Pvt. Ltd. “Poor exports, resumption of higher production in the coming months and a good soybean crop are pressuring prices. Demand should be relatively weak in the coming months.”

Soybean oil for July delivery slid 0.3 percent to 49.29 cents a pound on the Chicago Board of Trade and soybeans gained 0.3 percent to $13.84 a bushel.

Refined palm oil for September delivery lost 0.6 percent to 6,074 yuan ($983) a ton on the Dalian Commodity Exchange, while soybean oil retreated 0.6 percent to 7,598 yuan a ton.

To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net

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