Crude Palm Oil Stumbles On Long Liquidation, Profit-Taking

Crude palm oil futures on Malaysia’s derivatives exchange fell Monday, extending a downward correction from the highs hit a week earlier amid profit-taking and liquidation of long positions.

Broad weakness in commodities due to concerns about possible further monetary tightening in China continued to set the tone for the market, but strong export growth and seasonally low supply may help to limit palm oil's losses, trade participants said.

The benchmark May contract on Bursa Malaysia Derivatives ended MYR59, or 2.2%, lower at an intraday low of MYR2,590 a metric ton.

Weak buying interest in the cash market, affected by the sharp recent rise in prices, also damped market sentiment. On March 8, the May contract ended at MYR2,709/ton, its highest level since Jan. 6.

The fall in CPO futures below the psychological level of MYR2,600/ton during the afternoon session may be an indication that the market is vulnerable to further losses, a Kuala Lumpur-based trading executive said.

He pegged next support at MYR2,520 if the slide continues Tuesday.

While palm oil's supply-and-demand fundamentals are tight, frequent bouts of long liquidation can't be ruled out, an analyst in Singapore said.

However, he said, "The low production season and a pickup in exports may underpin CPO futures and prevent any sharp fall (in futures)."

In February, CPO output fell 12.5% from the previous month to 1.16 million tons, according to data from the government-linked Malaysian Palm Oil Board dated March 10.

On Monday, cargo surveyor SGS (Malaysia) Bhd. said palm oil exports in the March 1-15 period rose 5.1% from a month earlier to 638,548 tons, while Intertek Agri Services said exports in the period were up 18% at 669,227 tons.

In the cash market, palm olein for May/June traded at $810/ton, and July/August/September at $797.50/ton, said a Singapore-based trading executive.

Cash CPO for prompt shipment was offered MYR40 lower at MYR2,630/ton.

Open interest on the BMD was 81,748 lots Monday, down from 82,037 lots Friday. One lot is equivalent to 25 tons.

A total of 22,165 lots of CPO were traded versus 17,096 lots Friday.

Closing BMD Crude Palm Oil (CPO) futures prices in MYR/ton at 1000 GMT:

Month      Close    Previous   Change    High    Low
Mar 2010   2,630    2,670      Down 40   2,630   2,630
Apr 2010   2,609    2,660      Down 51   2,641   2,609
May 2010   2,590    2,649      Down 59   2,631   2,590
Jun 2010   2,575    2,631      Down 56   2,615   2,575

-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233; shie-lynn.lim@dowjones.com

(END) Dow Jones Newswires

March 15, 2010 06:59 ET (10:59 GMT)