Crude palm oil futures on Malaysia's derivatives exchange fell Tuesday, as investors booked profits after Monday's 1.9% gain.
The benchmark May contract at Bursa Malaysia Derivatives ended 0.6% lower at 2,399 ringgit a metric ton after moving in the tight range of MYR2,389/ton-MYR2,428/ton.
Trading volumes were thin as investors kept to the sidelines ahead of Wednesday, when vegetable oil analysts Dorab Mistry and James Fry are expected to give their price outlook forecasts at a palm and laurics oil conference in Kuala Lumpur that kicked off this week, market participants said.
Traders are also keeping an eye on Malaysia's palm oil production, inventories and exports data for February from industry regulator Malaysian Palm Oil Board as well as March 1-10 palm oil shipments data from cargo surveyors Intertek Agri Services and SGS (Malaysia) Bhd. due next week, they said.
Stockpiles in Malaysia have risen to record levels in the past year as the weak economic outlook dampened demand for the tropical oil.
Inventories in Malaysia, the world's second largest palm oil producer, rose to an all-time high of 2.63 million tons in January.
"Malaysia and Indonesia may need to find [new markets] for palm oil in order to take up the slack caused by increased CPO supply and lower biodiesel usage," Singapore-based Chris de Lavigne, the global vice president of consulting in industrial practice at Frost & Sullivan, said at an industry conference. "Until then, prices could see a mini slump in 2013."
Still, port closings in the state of Sabah--Malaysia's biggest palm oil growing region--caused by a standoff between security forces and armed Filipino followers of a Muslim clan leader, will likely support palm oil prices, trading executives said.
"The palm oil ports of Sahabat, Tawau and Kunak have shut down after the clashes [in Sabah's coastal town of Lahad Datu]," a shipping executive at a Kuala Lumpur-based surveyor firm said. "Prolonged port closures will leave exporters with little choice but to divert their shipments to other ports, delaying deliveries to consumers."
In addition to port closures, some of the refineries are also temporarily shutting down operations until the violence ebbs while others are evacuating plantation workers amid the clashes, market participants said. This could curb production in the interim, limiting supplies and supporting prices, they added.
Meanwhile, in the cash market, refined palm olein was offered at $815/ton, free on board Malaysian ports, said a Singapore-based physical market broker.
Open interest on the BMD was 165,744 lots versus 162,542 lots Monday. One lot equals 25 tons.
A total of 19,877 lots of CPO were traded versus 36,692 lots Monday.
Ending BMD CPO futures prices in MYR/ton: Month Close Previous Change High Low Mar'13 2,392 2,400 -8 2,392 2,390 Apr'13 2,389 2,405 -16 2,407 2,386 May'13 2,399 2,413 -14 2,428 2,389 Jun'13 2,408 2,423 -15 2,435 2,402