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VEGOILS-Palm oil set for 7% weekly loss on slowing need; Middle East tensions underpin

Malaysian palm oil futures gave up early gains on Friday, setting them on course for a 2nd successive weekly decrease, as traders weighed issues over intensifying stress in the Middle East and slowing palm oil demand.

The benchmark palm oil agreement for July shipment on the Bursa Malaysia Derivatives Exchange was unchanged by the midday break. It had actually risen as much as 1.4% throughout early trade.

For the week, the contract is poised for a near 7% weekly decrease.

The marketplace is keeping track of reports about Israeli rockets attacking a website in Iran, in the current tit-for-tat exchange between the 2 arch foes, whose years of shadow war has broken out into the open, threatening to drag the area deeper into dispute.

Speculators would rather cover their brief positions now because of worries that the escalating stress in the Middle East will mean an extended war, which will rise petroleum prices and underpin palm oil prices, Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.

But weak point in rates of competing grease is consuming into palm oil's need and will cap gains, he stated.

Oil prices leapt $3 a barrel on Friday in reaction to growing tensions in between the 2 countries, stimulating issues that Middle East oil supply might be disrupted.

More powerful petroleum futures make palm a more attractive alternative for biodiesel feedstock.

In related oils, Dalian's most-active soyoil agreement fell 0.2%, while its palm oil agreement was down 0.27%. Soyoil prices on the Chicago Board of Trade climbed up 0.3%.

Palm oil is affected by cost movements in related oils as they contend for a share in the global veggie oils market.

Palm oil may break support at 3,969 ringgit per metric heap, and fall even more to the 3,899-3,942 ringgit variety, said technical expert Wang Tao.

(source: Reuters)