Palm oil futures dropped below RM2,000 for the first time since March 31 on concern a seasonal increase in production in the second half would swell stockpiles and damp prices of the vegetable oil.

Palm oil for September delivery on the Malaysia Derivatives Exchange slipped as much as 4.1 per cent to RM1,984 (US$557) a metric ton. It was at RM1,996 at 11:44am.

“It will probably settle slightly below this level for some time as supply starts picking up,” Alain Lai, an analyst at UBS Securities Malaysia Sdn Bhd in Kuala Lumpur, said by phone. “The market has turned from bullish to bearish.”

Stockpiles in Malaysia, the second largest-producer, grew for the first time in six months in May as production climbed 8.5 per cent, the biggest month-on-month increase in a year, the Malaysian Palm Oil Board said June 10. It will announce June data on July 10.

Inventories will remain high if export demand from China and India, the biggest buyers of the tropical oils, slows.

Malaysia’s exports gained 2.3 per cent in May, according to the Palm Oil Board. Preliminary data from independent surveyors shows June exports were little changed.

Exports were 1,227,663 metric tons, compared with 1,227,894 tons in May, according to Societe Generale de Surveillance. Intertek estimates June exports gained 1.6 per cent to 1,230,741 tons, from 1,211,716 tons in May. — Bloomberg Source : Business Times

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