Malaysian palm oil futures reversed early gains and were headed for a weekly decline on Friday, as traders booked profits ahead of a long holiday weekend, while elevated inventories also weighed on sentiment.

The benchmark palm oil contract FCPO1! for November delivery on the Bursa Malaysia Derivatives Exchange lost 13 Malaysian ringgit, or 0.29%, to 4,441 ringgit ($1,055.37) by the midday break. It rose as much as 0.75% earlier in the session.

The contract is down 0.16% so far for the week.

The market will remain shut on September 15-16 for a public holiday.

“The futures is cashing out from the recent rally on the back of softer Dalian, weak Malaysian Palm Oil Board (MPOB) data, export slowdown and the coming long holiday,” a Kuala Lumpur-based trader said.

Malaysia’s palm oil stocks surged to a 20-month high in end-August as production increased and exports slipped slightly, data from the MPOB showed earlier this week.

Dalian’s most-active soyoil (DBYcv1) and palm oil CPO1! contracts also pared earlier gains and were last up 0.6% and 0.69%, respectively. Soyoil prices on the Chicago Board of Trade (CBOT) ZL1! lost 0.31%.

Palm oil tracks the price movements of rival edible oils as it competes for a share of the global vegetable oils market.

Chicago soybeans, corn and wheat were on track for weekly gains, as traders adjusted positions ahead of a key U.S. supply and demand report.

Crude oil prices fell on Friday amid concerns about the possible softening of U.S. demand and broad oversupply.

Weaker crude oil futures make palm a less attractive option for biodiesel feedstock.

The ringgit USDMYR, palm’s currency of trade, strengthened 0.26% against the dollar, making the commodity more expensive for buyers holding foreign currencies.

Palm oil FCPO1! may extend gains to 4,506 ringgit per metric ton, as a flat pattern might be developing, Reuters technical analyst Wang Tao said.
Source: Reuters