Malaysian Palm Oil Loses Strength on the Weekend Session, Cautious Trading Expected in Coming Days

Malaysian palm oil has shown a stunning rally during the recently ended week, with the first month contract surpassing the 7000 barrier for the first time. The benchmark futures contract fell sharply on Friday and closed at 6274, down 7.53 percent over previous closing.

Prices were down on Friday mainly because of profit taking by the positional traders and investors. A cautious approach for the coming week prompted the participants to reduce their exposure in the buy positions in the derivatives market therefore profit booking increased massively on Friday.

The crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives is expected to trade with a cautious mode this week but the overall bias appears upwards. Trading activity is expected to get impacted from anticipation of positive data due to be released this week, in addition to the Russia-Ukraine war. The Malaysian Palm Oil Board will release reports in context to the stockpile, production, and export numbers on March 10, which will be an important cue for the global players. Palm oil has the biggest market in the Asia-Pacific region, accounting for nearly 50% of total global revenues. The Asia-Pacific or Asia Pacific is the part of the world in or near the Western Pacific Ocean. It generally includes countries of East Asia, South Asia, Southeast Asia, Australia and New Zealand. 

Analysts and experts are of the view that stocks of palm oil in Malaysia may drop to the lowest in 11 months because of a higher exports pace than the production. The palm oil market is expected to remain cautious next week as traders will be closely assessing the development with respect to the Russia-Ukraine crisis. The crisis had disrupted the supply of vegetable oil from the two countries, particularly sunflower oil, which has prompted demand for palm oil as a substitute. As a result there has been a massive rise in crude palm oil prices. The importance of palm oil has increased in the last decade across the globe.

There are various factors supporting the market growth of palm oil in the Asia-Pacific region, such as the rapidly growing population and the corresponding growth in demand for food commodities. CPO is presently the most expensive vegetable oil in the market, and may force some countries to opt for other vegetable oils, in near future.