Malaysian palm oil futures dropped for a second day on yesterday as investors, spooked by worries over higher production, continued to lock in profits from the recent crude oil-driven rally, traders said.
“The market is now back to its fundamentals. People are now talking about good supply, meaning that stock may go up. So they are just liquidating their positions,” said a trader at a Kuala Lumpur-based brokerage.
The trader said as palm tress now enter higher production season, the market is going to be very sensitive to demand.
The benchmark August contract on the Bursa Malaysia’s Derivatives Exchange settled down RM23 to RM2,575 per tonne.
Overall volume was 9,830 lots of 25 tonnes each, less than the usual 10,000 lots.
As crude oil prices rise, prices for vegetable oils which are used for biofuel — including palm oil, soybean and rapeseed — tend to track those gains.
The oil markets’ seven-day rally dipped yesterday ahead of weekly US inventory data and as investors grew more cautious ahead of the US$70 mark.
US light, sweet crude was down 34 cents at US$68.19 a barrel by 1042 GMT, off an earlier peak of US68.72. US soyoil for July contract was down 0.99 per cent in Asian trade.
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