Palm Oil Prices Slide On Weak Rival Oils, Trade War Fears

Malaysian palm oil futures closed lower on Wednesday, erasing the previous session's gains, weighed down by falling prices for competing vegetable oils in the Dalian and Chicago markets, alongside growing economic concerns linked to trade wars.

The benchmark June palm oil contract (FCPO1!) on Bursa Malaysia Derivatives fell 42 ringgit, or 1%, to close at 4,146 ringgit (about US$922.56) per tonne.

Darren Lim, a commodities analyst at Singapore-based brokerage Phillip Nova, said:
"Price movements are currently being driven by market sentiment and broader economic concerns, particularly those tied to the ongoing trade wars."

He added:
"As global markets grapple with uncertainty, the vegetable oil sector, including palm oil, has been swept along in a downward trend."

In detail:

• The most actively traded soybean oil contract in Dalian fell 0.89%,
• while the palm oil contract dropped 1.9%.
• Soybean oil prices on the Chicago Board of Trade (CBOT) lost 0.71%.

Palm oil prices typically track movements in competing vegetable oils, as they compete for global market share.

Indonesian Finance Minister Sri Mulyani Indrawati said on Tuesday that Indonesia would adjust its export tax on crude palm oil to ease the burden of US tariffs on exporters.

Additional factors at play:

• Oil prices fell to their lowest level in four years on Wednesday, marking their worst five-day losing streak in three years.
• Many other commodities, including base metals, also declined amid escalating trade tensions between China and the United States.
• Lower crude oil prices make palm oil a less attractive option for use as biodiesel feedstock.
• The Malaysian ringgit, the currency in which palm oil is traded, weakened 0.11% against the US dollar, making the commodity cheaper for buyers holding foreign currencies.

Source: Reuters