Malaysian palm oil futures slid nearly 2 percent on Tuesday after a rally last month that lifted prices to a 15-month high shifted demand for the tropical oil to rival Indonesia. A firmer ringgit, the currency in which palm oil is traded in, also weighed on prices. Traders said the price of the Malaysian commodity should drop by around 3 percent from current levels to revive demand. Palm oil for December delivery on the Bursa Malaysia Derivatives exchange closed 1.9 percent lower at 2,370 ringgit ($542) a tonne.
The benchmark contract touched a high of 2,444 ringgit, near the 15-month peak of 2,460 ringgit reached on September 29, before sellers surfaced to push the price down to a session trough of 2,353 ringgit. “Due to the high prices a lot of demand from Malaysia has shifted to Indonesia,” said a trader based in Kuala Lumpur, adding a level near 2,300 ringgit may revive demand for Malaysian output.
Malaysian Prime Minister Najib Razak has called on Indonesia to take action against people setting fires that have caused choking smoke to drift across the region, with the sky over southern Thailand the latest to be clouded by the pollution. On Tuesday, Malaysia’s minister for plantations, industries and commodities, Amar Douglas Uggah Embas, said the country plans to limit imports of crude palm oil to reduce stockpiles to manageable levels of around 2 million tonnes.
“There was a projection that Malaysia’s stocks might reach 3 million tonnes by November. If it reaches that level, prices will likely come down and it is an overstock in the country,” Uggah Embas said. In competing vegetable oil markets, US December soyoil contract was marginally lower. Chinese markets remained shut for the week-long National Day break and will reopen on Thursday.