Malaysian palm oil futures experienced a sharp decline of more than 3% as trading resumed post a public holiday. The market was dragged down by weakened Dalian contracts and plummeting crude oil prices.
The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange closed at 3,920 ringgit ($834.04) per metric ton, marking its steepest daily drop since May 31, 2023, with a loss of 156 ringgit or 3.83%.
Mitesh Saiya, trading manager at Mumbai-based firm Kantilal Laxmichand & Co., attributed the decline to the pressure from Dalian’s soyoil futures and the downward trend in crude oil prices.
In Dalian, the most-active soyoil contract slipped by 1.58%, while its palm oil counterpart saw a decrease of 1.75%. Similarly, soyoil prices on the Chicago Board of Trade were down by 0.29%.
As palm oil competes with other oils in the global market, any price movements in related oils have a significant impact on its trading.
The fall in oil prices extended on Tuesday, with Brent crude futures dropping by $1.33, or 1.70%, to $77.03 a barrel. This trend raises concerns among investors about potential supply increases later in the year, especially with signs of weakening U.S. demand.
The decline in crude oil futures reduces palm oil’s attractiveness as a biodiesel feedstock option.
Furthermore, the slight strengthening of the ringgit, the currency in which palm oil is traded, by 0.09% against the dollar contributes to making the commodity marginally more expensive for buyers holding foreign currency.
