Crude palm oil futures on Malaysia's derivatives exchange ended lower Friday after the U.S Federal Reserve's decision to raise its discount rate pushed the dollar higher.
But commodity prices in Asia, including palm oil, are still vulnerable to further declines next week, when volume is expected to pick up, trade participants said.
The benchmark May CPO contract on the Bursa Malaysia Derivatives ended MYR4 lower at MYR2,596 a metric ton, with 11,910 lots traded, well below average volume on the BMD of 14,000-16,000 lots.
"The move by the Fed may lead to temporary selling pressure on the BMD in the next trading session," said a trading executive from Jakarta. "CPO futures may ease to around MYR2,500-MYR2,550 next week, when the Chinese traders return after a long break."
Crude oil and soyoil futures remained in negative territory in Asian trade, preventing a sustained rise in palm oil prices, which briefly spiked above the MYR2,600 psychological level to an intraday high of MYR2,609/ton.
Light, sweet crude oil for March delivery reached an intraday high of $79.29 Thursday, buoyed by U.S. inventory data that showed distillate stocks fell more than expected, but then tumbled to below $78 a barrel during Asian trading.
March soyoil on the Chicago Board of Trade was trading 29 points lower at 38.41 cents a pound by the end of trade on the BMD.
Palm oil futures held above MYR2,550 despite a sharp fall in other commodities because "supply-demand fundamentals are still rather supportive," a Singapore-based trading executive said.
"Output in February and March is expected to fall, and this may reduce Malaysia's palm oil inventories, which is bullish for palm prices," he said.
Palm oil output in January declined 13% to 1.32 million tons, the lowest level in nine months, trimming palm inventories to 2.0 million tons from 2.24 million tons in December, based on recent data from the government-linked Malaysian Palm Oil Board.
In the cash market, palm olein for April/May/June delivery traded at $790/ton, $792.50/ton and $795/ton a Singapore-based trader said.
Cash CPO for prompt shipment was offered at MYR2,610/ton.
Open interest on the BMD was 77,109 lots Friday, down from 81,347 lots Thursday. One lot is equivalent to 25 tons.
Closing BMD Crude Palm Oil (CPO) futures prices in MYR/ton at 1000 GMT:
Month Close Previous Change High Low
Mar 2010 2,610 2,611 Down 01 2,610 2,585
Apr 2010 2,599 2,604 Down 05 2,610 2,580
May 2010 2,596 2,600 Down 04 2,609 2,577
Jun 2010 2,590 2,600 Down 10 2,598 2,571