Malaysian palm oil futures extended earlier losses to fall more than 4 percent on Monday as the tropical oil tracked other global markets lower on concerns about the Chinese economy. At the close, the benchmark palm oil contract for November on the Bursa Malaysia Derivatives Exchange ended 3.6 percent lower at 1,915 ringgit ($450) a tonne. Palm oil has sunk 10 percent this month and is now trading at its lowest level in nearly six-and-a-half years.
“It’s a bloodbath all over,” said a trader with a foreign commodities brokerage in Kuala Lumpur. “Spillover weakness from the meltdown in global equities and commodities. Palm earlier fell to 1,904 ringgit, its lowest level since March 19, 2009. Traded volume stood at 61,910 lots of 25 tonnes each, well above the roughly 35,000 lots usually traded by the close.
Alarm bells rang across world markets as a 9 percent dive in Chinese shares and a sharp drop in the dollar and major commodities panicked investors. Oil prices fell more than 4 percent to fresh 6-1/2-year lows after Chinese stock markets suffered their biggest one-day drop since the global financial crisis. In comparative vegetable oils, the US September soyoil contract was down 4.1 percent in late Asian trade, while the most active soybean oil contract on the Dalian Commodity Exchange was 4 percent lower.
“Soy oil and crude are both down,” said a second palm trader. “Sentiment is negative – looks like nothing is positive today.” A weak Malaysian ringgit, which makes palm cheaper for offshore buyers, offered limited support to palm oil. “It’s a bit oversold so there could be a retracement but the downward trend is still intact,” said a third palm trader, adding that prices are likely to now breach 1,800 ringgit.