Palm oil hits twoweek low on slowing demand, EU summit

SINGAPORE- Malaysian crude palm oil slipped to a two-week low on Monday on slowing demand and investor caution ahead of a likely debt swap deal for Greece that would help the country avoid a messy default.

European leaders will sign off on a permanent rescue fund for the euro zone at a summit on Monday although unresolved problems in Greece expected to cast a shadow on the discussions.

In signs of slowing demand for palm oil, cargo surveyors’ reports showed a double-digit decline in Malaysian palm oil exports from Jan. 1 to 25.

A stronger ringgit used to price palm oil feedstock also made the commodity more expensive for refiners, limiting trade interest in the palm oil market that has nearly 2 percent this month.

“The market is lower on negative margins, stronger ringgit and broad-based chart inspired selling,” said a trader with a local commodities brokerage in Malaysia.

“We can expect choppy trading as market participants look to establish bottom around 3,100 ringgit and below there at 3,070 ringgit.”

By the midday break, benchmark April palm oil futures on the Bursa Malaysia Derivatives Exchange lost 0.5 percent to close at 3,119 ringgit ($1,025) per tonne. Prices earlier touched 3,113 ringgit, a level last seen since Jan. 16.

Traded volumes were thin at 5,169 lots of 25 tonnes each, compared to the usual 12,500 lots.

On the demand side, Malaysian palm oil exports for the first 25 days of the month dropped close to 20 percent, which some traders attributed to the shift in orders to Indonesia, which slashed export taxes for processed oils.

Exports also fell due to a delay by Malaysia in issuing tax free crude palm oil export taxes, sources said. This has made it difficult for licence holders to supply overseas refiners with cheao feedstock and meet existing export contracts for crude palm oil.

Malaysian crude palm oil exports slumped to 74,640 tonnes for the Jan. 1-25 period from 301,734 tonnes a month ago, said cargo surveyor Societe Generale de Surveillance.

Cargo surveyors will issue Janaruy’s overall export data from Malaysia on Tuesday, which will show the same trend.

Brent crude edged down on Monday as investors cautiously eyed a European Union summit for a resolution to the region’s debt crisis, but prices stayed above $111 per barrel on concerns over supply from Iran and South Sudan.

The U.S. soyoil contract for March delivery slipped 0.3 percent in Asian trade on investor caution ahead of the EU summit. The most active September 2012 soyoil contract on China’s Dalian Commodity exchange gained 0.5 percent after closing a week for the Lunar New Year holidays.