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Palm oil drops 3pc as Indonesia keeps domestic sale rule

KUALA LUMPUR: Malaysian palm oil futures slid 3% on Tuesday, ending a three-day climb as Indonesia maintained its domestic sales rule and traders fretted about slow export demand.

The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange fell 123 ringgit, or 3.13%, to 3,813 ringgit ($894.44) a tonne.

“Since yesterday (Monday) afternoon, we noticed the contract readjusting lower on the Indonesian announcement to hold the 1:6 export ratio versus domestic consumption,” said Marcello Cultrera, director at commodities consultancy Apricus 8 Pte Ltd.

This suggests that supply is seen improving with higher year-on-year ending-stocks, he said.

Indonesia’s trade minister said on Monday cooking oil producers must increase supply to the domestic market by 50% for the next three months to meet rising demand ahead of Islamic religious festivities, but it would not affect the export-to-domestic sales ratio.

The nation’s palm oil fund (BPDPKS) estimated that 30.22 trillion rupiah ($2.02 billion) would be needed to subsidise palm oil-based biodiesel distribution in 2023.

In Malaysia, exports from Malaysia in January slumped 27% from a month earlier due to weaker demand from key markets Europe, China, and India, cargo surveyor data showed.

Dalian’s most-active soyoil contract fell 0.5%, while its palm oil contract eased 2%. Soyoil prices on the Chicago Board of Trade were down 0.6%.

Malaysia’s financial markets will be closed on Wednesday for a public holiday. Trading will resume on Thursday, Feb. 2.

Source : Brecorder