10.03.2020 (Business Recorder) - Malaysian palm oil futures ended 5% down on Monday, as crude oil prices crashed after Saudi Arabia slashed its official rates in a market rattled by the impact of the coronavirus outbreak. The benchmark palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange closed down 123 ringgit, or 5.02%, at 2,328 ringgit ($552.58).
Palm oil fell as much as 10% earlier in the session, to touch its lowest price since October 2019. The contract has already been under pressure on worries over the economic impact of the coronavirus outbreak, which has now spread rapidly beyond China.
Oil prices fell about 27% on Monday, the most since 1991, after Saudi Arabia started a price war with Russia by slashing its selling prices and pledging to unleash pent-up supply onto a market reeling from falling demand because of the virus. Weak crude oil futures make palm a less attractive option for biodiesel feedstock.
“Despite expectations of lower month-on-month Malaysian February palm oil inventories, I expect palm oil price to remain under pressure in the short term as long as crude oil price remains low," said Oscar Tjakra, senior analyst at Rabobank's RaboResearch Food & Agribusiness.
February stockpiles are likely to drop 1.4% to 1.73 million tonnes from January, according to a Reuters survey. Official palm oil data will be published by the Malaysian Palm Oil Board on Tuesday. Palm oil gained 5.7% last week as demand from Africa and the Middle East picked up ahead of the Muslim holy month of Ramadan, countering fears over the impact of the coronavirus epidemic.
Dalian's most-active soyaoil contract traded 3.97% lower, while its palm oil contract fell 4.96%. Soyaoil prices on the Chicago Board of Trade were down 3.93%. Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
Copyright Reuters, 2020