-- Malaysian palm oil prices tracked a weakening in crude oil and soybean oil on Tuesday, and were further pressured by a decline in exports and demand from India.
The Bursa Malaysia Derivatives' May and June crude palm oil contracts dropped 2% to hit their lowest since mid-March at 4,418 Malaysian ringgit ($1,129.45) per metric ton and 4,464 ringgit/mt, respectively.
Overnight declines in Chicago soybean oil dragged Malaysian palm oil down, according to Iceberg X trader David Ng, as cited by Dow Jones.
Preliminary estimates of a 30.7% to 38.9% month-over-month drop in Malaysian shipments during the first 10 days of April also weighed on prices.
In India, palm oil purchases reportedly fell to a three-month low of 689,462 metric tons in March, down from 847,689 mt in February, according to the Solvent Extractors' Association of India. Soybean oil imports also softened 4% month over month to 287,220 mt.
Indian buyers will likely remain cautious about stepping up purchases through next week as prices remain elevated, but they may eventually increase imports to stock up ahead of seasonal demand, according to analysts cited by The Edge and Trading Economics.
Competitiveness of Malaysian exports is expected to improve as supplies from Indonesia and Thailand decrease with the implementation of higher biofuel blending mandates.
Supply uncertainties due to the Middle East conflict will also continue to boost Malaysian exports as buyers accelerate stockpiling despite rising prices, Bernama reported, citing investment banks.
Such consumer behavior was observed in March, when Malaysian exports jumped 40.7% from month-ago levels despite a surge in prices following the onset of the geopolitical conflict in late February, Kenanga Investment Bank reportedly said.
Malaysian inventories could drop to around 2 million metric tons over the next two months as exports remain robust, according to the Public Investment Bank.
CIMB Securities, as cited by New Straits Times, projects domestic stocks to slip to 2.2 mmt in April from 2.3 mmt in March, if higher demand is sustained and production declines.
Fertilizer supply disruptions and the El Nino weather phenomenon pose downside risks to the country's palm oil output.
These factors could lift palm oil futures going forward, and today's price moderation is likely to be short-lived given the potential for more upside from the Middle East conflict, Ng reportedly said.