KUALA LUMPUR (Dow Jones)--Crude palm oil futures on Malaysia's derivatives exchange fell to their lowest levels in a week Tuesday, tumbling as much as 0.7% as the ringgit strengthened against the dollar, making palm oil a more expensive feedstock.
Market sentiment was also weighed down by rising CPO production, trade participants said. The benchmark August contract on the Bursa Malaysia Derivatives exchange ended down MYR17 at MYR2,432 a metric ton after hitting a one-week low at MYR2,431/ton. The dollar fell to MYR3.3230, from yesterday's close of MYR3.3330, making CPO more expensive for palm oil refiners.
A pullback in crude oil prices during Asian trade also weighed on prices. New York Mercantile Exchange light, sweet crude oil for July delivery was trading 46 cents lower at $70.98 a barrel at 1006 GMT. Trade participants said Malaysia's May palm oil output likely rose 5%-7% to around 1.37 million to 1.40 million tons, while end-May palm inventories were probably little changed at 1.62 million-1.63 million tons as exports didn't rise enough to offset the seasonal increase in production. The government-owned Malaysian Palm Oil Board is scheduled to issue Malaysia May palm oil output, stock and export data Thursday.
"The rise in production is likely to continue into June but (it) may be gradual as heavy rains may disrupt harvesting activities," said a senior executive of a Malaysia-based plantation company.
Rising production and inventories will likely continue to weigh on market sentiment, trade participants said.
"Prices may remain in a MYR2,400-MYR2,500/ton range in June," said a senior executive at a Kuala Lumpur-based commodities brokerage.
Meanwhile, CME's Group Inc.'s (CME) dollar-based CPO futures for September were trading 25 cents higher at $724.75/ton.
August rupiah-denominated CPO futures on the Indonesia Commodity and Derivative Exchange ended 0.9% lower at IDR6,605 a kilogram with 80 lots traded. One lot is equivalent to 10 tons. The September contract ended 1% lower at IDR6,500/kg with 148 lots done. In the cash market, palm olein for June was offered at $792.50/ton, while cash CPO for prompt shipment was offered unchanged at MYR2,500/ton.
Open interest on the BMD was at 71,105 lots, up from 69,345 lots Monday. One lot is equivalent to 25 tons.
A total of 14,202 lots of CPO were traded, compared with 14,255 lots Monday.
Closing BMD CPO futures prices in MYR/ton at 1000 GMT:
Month Close Previous Change High Low
Jun'10 2,535 2,541 Down 06 2,545 2,535
Jul'10 2,478 2,496 Down 18 2,496 2,476
Aug'10 2,432 2,449 Down 17 2,456 2,431
Sep'10 2,407 2,419 Down 12 2,427 2,407
-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233; firstname.lastname@example.org
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