KUALA LUMPUR (March 15): Palm oil stretched losses over four days to 13%, retreating from record highs, as petroleum prices plunge and traders keep a close watch on whether top grower Indonesia issues more export permits.

Futures for May delivery fell as much as 5.7% to RM5,996 a ton, before closing at RM6,128. Extended profit-taking following the selloff on Monday, coupled with crude oil dropping below the psychological US$100 level, is weighing on cooking oils, said Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental. 

Talk of Indonesia approving more export permits and expectations of rising Malaysian output are also pressuring prices, Thiaragajan said, adding traders will be watching surveyor export figures for Malaysia to have a clearer picture on inventories.

Exports from the second-biggest grower rose 16% during March 1-15 from the previous month, a slightly slower pace than the 18% increase during the first 10 days of March, data from Intertek Testing Services showed on Tuesday. 

“Ramadan demand is expected to set in now as prices have corrected sharply,” Thiaragajan said. 

Palm oil, used in thousands of products from margarine to lipstick and hand sanitizer, has been rocked by volatile price swings, as investors react to the impact of the Russian invasion of Ukraine and supply concerns from top growers Indonesia and Malaysia. Prices have erased most of the gain since the start of the war, after climbing to a record of RM7,268 just last week. 

Meanwhile, the backwardation in palm oil is still wide, as nearby supplies in Malaysia remain tight as farmers continue to grapple with labour shortages. The expiring March contract is about RM1,152 more expensive than May, around double the spread a week ago.

Source : The Edge Markets