DJ Asian Crude Palm Oil Slips To New 2011 Low On US Credit Downgrade 08.08.2011
KUALA LUMPUR (Dow Jones)--Crude palm oil futures on Malaysia's derivatives exchange plunged Monday to hit a new low for the year, following a broad selloff across markets after Standard & Poor's downgraded the triple-A credit rating of the U.S.
Benchmark October CPO on the Bursa Malaysia Derivatives fell sharply towards the end of trade as investors rushed to liquidate longs. The contract settled 1.9% lower at MYR2,994 a metric ton, the lowest level since Oct. 22.
Palm oil is vulnerable to further declines in the next few weeks, as macroeconomic concerns "will still be a focal point for investors," a commodities broker in Singapore said.
Leading vegoil analyst Dorab Mistry said over the weekend that CPO prices may fall below a key support level of MYR2,800/ton, if crude oil extends declines.
"Suddenly from growth, we are now talking about a second recession. So if that happens, all commodity prices will come down. Palm oil could fall a bit more also," Mistry, who heads the vegoil trading desk at Godrej International, said.
But bargain-hunting could emerge in coming sessions, as expectations for higher demand and nearby supply tightness could entice buyers.
"Cash prices didn't slump as much as futures today and that is an indication that physical oil is limited...I doubt prices will fall more," Vijay Mehta, director at Singapore-based Commodity Link Pte. Ltd, said.
Production in August and September may fall and keep supplies low as harvesters go on holiday during the Islamic fasting month of Ramadan that began last week.
Refined palm olein for September shipment was offered $5 lower at $1,140/ton, while cash CPO for prompt shipment was offered MYR30 lower at MYR3,120/ton, physical market data showed.
Market participants will likely be on the lookout for supply-demand data over the next few days.
On Wednesday, cargo surveyors are expected to issue Aug. 1-10 export estimates, while the government-linked Malaysian Palm Oil Board will issue July production, stock and export data.
On Thursday, the U.S. Department of Agriculture is scheduled to release a monthly supply-demand report, which may show reduced soybean yields due to hot and dry weather, market participants said.
Traded volume in crude palm oil futures on the BMD rose to 38,986 lots from 35,350 lots Thursday. One lot equals 25 tons.
Open interest was 130,417 contracts compared with 127,541 contracts.
Closing BMD CPO futures prices in MYR/ton at 1030 GMT: Month Close Previous Change High Low Aug'11 3,120 3,128 Down 8 3,133 3,120 Sep'11 3,036 3,079 Down 43 3,074 3,036 Oct'11 2,994 3,051 Down 57 3,046 2,994 Nov'11 2,980 3,044 Down 64 3,029 2,979