Bursa palm oil futures tumble to 6½-year low

JAKARTA: Malaysian palm oil futures extended earlier losses to fall more than 4% yesterday as the tropical oil tracked other global markets lower on concerns about the Chinese economy.

At the close, the benchmark palm oil contract for November on Bursa Malaysia Derivatives ended 3.6% lower at RM1,915 a tonne.

Palm oil has sunk 10% this month and is now trading at its lowest level in nearly 6 ½ years.

“It’s a bloodbath all over,” said a trader with a foreign commodities brokerage in Kuala Lumpur. “Spillover weakness from the meltdown in global equities and commodities.

Palm earlier fell to RM1,904, its lowest level since March 19, 2009.

Traded volume stood at 61,910 lots of 25 tonnes each, well above the roughly 35,000 lots usually traded by the close.

Alarm bells rang across world markets as a 9% dive in Chinese shares and a sharp drop in the dollar and major commodities panicked investors.

Oil prices fell more than 4% to fresh 6 ½ -year lows after Chinese stock markets suffered their biggest one-day drop since the global financial crisis, with Brent and US light crude dropping below the latest supports of US$45 and US$40 a barrel respectively.

In comparative vegetable oils, the US September soyoil contract was down 4.1% in late Asian trade, while the most active soybean oil contract on the Dalian Commodity Exchange was 4% lower.

“Soy oil and crude are both down,” said a second palm trader. “Sentiment is negative – looks like nothing is positive today.”

Palm oil may fall more to the next support at RM1,908, as suggested by its wave pattern and a Fibonacci projection analysis, said Wang Tao, a Reuters market analyst.

A weak ringgit, which makes palm cheaper for offshore buyers, offered limited support to palm oil.

“It’s a bit oversold so there could be a retracement but the downward trend is still intact,” said a third palm trader, adding that prices are likely to now breach RM1,800. – Reuters