Palm oil dropped, snapping a four-day rally, as renewed concern that Europe’s debt crisis will worsen led to a decline in crude oil, reducing the appeal of biofuels.
The contract for delivery in April fell as much as 1.2 percent 2,536 ringgit ($819) a metric ton on the Malaysia Derivatives Exchange, before trading at 2,546 ringgit at 11:25 p.m. in Kuala Lumpur. Futures extended gains in the past four days through yesterday to 5 percent, closing at a three-month high after the Malaysian government said exports may be allowed at zero duty for a third month in March.
Oil traded near the lowest level in more than a week in New York as investors speculated that Europe’s debt crisis will derail the global economic recovery. Spanish 10-year government yields jumped to a seven-week high yesterday as the country’s Premier Mariano Rajoy faces opposition calls to resign amid contested reports about illegal payments.
“Europe’s problems are not fully solved as reflected in the increase in Spain’s bond yield yesterday,” said Alan Lim Seong Chun, an analyst at Kenanga Investment Bank Bhd. “This will affect demand for crude oil and since palm oil is used in biodiesel so it will affect palm oil as well.”
Crude for March delivery was at $96.04 a barrel, down 13 cents, in electronic trading on the New York Mercantile Exchange after dropping 1.6 percent yesterday, the most since Dec. 6.
Crude palm oil exports from Malaysia may be allowed at zero duty in March if prices remain below the threshold of 2,250 ringgit a ton, Plantation Industries & Commodities Minister Bernard Dompok said in Putrajaya yesterday.
Refined palm oil for delivery in September fell 0.3 percent to 7,168 yuan ($1,149) a ton on the Dalian Commodity Exchange. Soybean oil for delivery in the same month dropped 0.5 percent to 8,852 yuan a ton.
Soybeans for March delivery were little changed at $14.88 a bushel on the Chicago Board of Trade, while soybean oil for March delivery lost 0.2 percent to 53.02 cents a pound.
To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
