Crude palm oil futures on Malaysia's derivatives exchange ended lower Tuesday as fears over uncertainty in Europe dented investor sentiment and sparked profit-taking in regional equities and commodities.
The benchmark April contract on Bursa Malaysia Derivatives ended 0.7% lower at 2,549 ringgits a metric ton, after moving in a MYR2,534-MYR2,556/ton range.
Fears about inclement weather in major soybean growing regions in Argentina and expectations for improving palm oil exports prevented further falls, a Kuala Lumpur-based trading executive said.
"Worries about political instability in Spain and Italy presented an opportunity for investors to lock in gains after palm oil's rally the past few sessions," the Kuala Lumpur-based executive said, noting that palm oil's broad price discount of over $300/ton to rival soyoil was also supportive.
Former Italian Prime Minister Silvio Berlusconi said he will scrap the current conservative fiscal policy if re-elected, while in Spain, Prime Minister Mariano Rajoy is facing allegations of having received cash payments.
Scorching heat and limited rainfall in Argentina raised concerns that the major soybean exporter may not produce the expected bumper crop that would help ease global supply tightness.
The supply concerns have driven up prices, making it more expensive to price-sensitive vegetable oil buyers.
Palm oil exports could improve in coming months, driven mainly by Malaysia's move to revamp its existing export duty structure as part of a plan to improve competitiveness and grab back market share from top producer Indonesia.
"Malaysia's [export tax] changes will aid refiners in the country as margins will improve," said Lee Yeow Chor, chairman of the Malaysian Palm Oil Council, the industry's marketing arm.
The council also forecasts higher shipments to emerging markets such as Myanmar and Iran as food consumption rises, he said.
Market participants cautioned that palm oil futures could turn choppy in coming days as investors may move to the sidelines ahead of the Lunar New Year holidays.
In the cash market, refined palm olein for February was offered at $840/ton, while cash CPO was offered at MYR2,450/ton.
Open interest on the BMD was 170,869 lots, versus 167,015 lots Monday. One lot is equivalent to 25 tons.
A total of 28,536 lots of CPO were traded versus 32,005 lots Monday.
Ending BMD CPO futures prices in MYR/ton: Month Close Previous Change High Low Feb'13 2,481 2,496 -15 2,495 2,476 Mar'13 2,528 2,539 -11 2,530 2,513 Apr'13 2,548 2,566 -18 2,556 2,534 May'13 2,564 2,585 -21 2,575 2,553