Palm set for over 6% weekly drop as China lockdown raises demand worries

September 02, 2022: Malaysian palm oil futures on Friday were set for a 6.5% weekly loss as fresh COVID-19 curbs in top buyer China added to demand worries, with expectations of higher output in Malaysia weighing on prices further.

The benchmark palm oil contract FCPOc3 for November delivery on the Bursa Malaysia Derivatives Exchange slid 89 ringgit, or 2.23%, to 3,905 ringgit ($871.17) a tonne during early trade, their lowest since Aug. 5.

FUNDAMENTALS

Traders are expecting production in Malaysia to rise as the peak harvest months arrive, but they are also concerned that poor demand might lead to a build-up of stocks.

The southern Chinese tech hub of Shenzhen tightened COVID-19 curbs, while the southwestern metropolis of Chengdu announced a lockdown of its 21.2 million citizens, stoking demand fears.

Dalian's most-active soyoil contract DBYcv1 fell 4.8%, while its palm oil contract DCPcv1 dropped 5.5%. Soyoil prices on the Chicago Board of Trade BOcv1 were down 0.5%.

Palm oil may test a support at 3,857 ringgit per tonne, a break below could open the way towards the 3,598-3,717 ringgit range, Reuters technical analyst Wang Tao said. 

MARKET NEWS

Asian shares were mixed and the dollar stood tall ahead of a key U.S. jobs report as investors braced for more aggressive rate hikes from the Federal Reserve, while commodities took an overnight dive amid new China lockdowns. 

Reuters