By Claire Leow
Dec. 23 (Bloomberg) -- Palm oil futures in Kuala Lumpur dropped amid concern demand may not pick up enough to offset record stockpiles during the typically low-demand Northern Hemisphere winter period.
Malaysian stockpiles in November climbed to a record 2.27 million tons even as exports rose a second month to 1.35 million tons, according to the country’s palm oil board Dec. 12.
“Demand really needs to pick up steadily to reduce the stockpiles,” said Ong Chee Ting, a plantation analyst at Aseambankers Malaysia Bhd. That’s unlikely to happen as demand typically slows during the Northern Hemisphere winter as the tropical oil clouds over, he added.
March-delivery palm oil dropped as much as 2 percent to 1,557 ringgit ($447) a metric ton on the Malaysia Derivatives Exchange. It was at 1,562 ringgit at 11:06 a.m.
Palm oil futures have slumped two-thirds from a record 4,486 ringgit a ton in March as the global recession cut demand. The commodity now trades at a 34 percent discount to soybean oil, from 6.1 percent on March 31, according to Bloomberg data.
Soybean oil traded in Chicago dropped 0.4 percent to 31.13 cents a pound at 11:09 a.m. Singapore time in after-hours trading.
While the discount of palm oil to soybean oil may lure buyers, since vegetable oils can be used as alternative fuels, a lot depends on the price of crude oil, Ong added. It’s hard to project profitability for bio-fuel producers with crude oil so volatile, affecting the outlook demand for bio-fuel feedstock, he said.
Crude oil has extended a five-month decline to November, after trading above a record $147 a barrel in July. Crude oil for February delivery fell as much as 71 cents, or 1.8 percent, to $39.20 a barrel. It was at $39.27 a barrel at 11:13 a.m. Singapore time on the New York Mercantile Exchange.
To contact the reporter on this story: Claire Leow in Singapore at cleow@bloomberg.net
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