By Claire Leow
July 13 (Bloomberg) -- Palm oil futures traded in Malaysia dropped, reversing earlier gains, on concern that higher second- half production will swell stockpiles and depress prices.
The price of the world’s most traded vegetable oil may remain below 2,000 ringgit ($558) a metric ton as output climbs faster than demand, according to Maybank Investment Bank Bhd. and OSK Research Sdn.
Palm oil for September delivery on the Malaysia Derivatives Exchange slid as much as 2.3 percent to 1,964 ringgit a ton and last traded at 1,990 ringgit a ton at 5:14 p.m. in Kuala Lumpur. The contract has slumped 19 percent in the past month. Stockpiles in Malaysia, the world’s second-largest producer, grew to 1.41 million tons in June, up 2.5 percent from May, the country’s Palm Oil Board said on July 10. Output climbed 3.6 percent.
“The market is presently worried about rising production and export prospects in the second half,” Ong Chee Ting, an analyst at Maybank, wrote in a report today. “We anticipate China’s and India’s pace of import growth to slow in the second half as these countries have stockpiled sufficiently in recent months.”
Prices may average around 1,800 ringgit a ton in the second half, said Ong. Palm oil averaged 2,192 ringgit in the first six months of this year.
The edible oil also tracked a broader decline in other commodities. Soybeans, crushed to make soybean oil, a direct substitute for palm oil, slid 0.9 percent to $9.09 a bushel on the Chicago Board of Trade. Crude oil for August delivery in New York dropped 0.9 percent to $59.35 a barrel at 4:38 p.m. Singapore time.
Palm oil and other vegetable oils can be used for alternative energy and often track crude oil prices.
To contact the reporters on this story: Claire Leow in Singapore at cleow@bloomberg.net; Soraya Permatasari in Kuala Lumpur at soraya@bloomberg.net
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