Palm oil headed for a weekly drop as worries over deteriorating demand weighed on the tropical oil, although losses were capped by tight supply in second-biggest producer Malaysia. The market is currently facing a slowdown in physical demand as the major buying season for Ramadan has passed, and there are no upcoming festivals to trigger fresh bulk purchases, according to an analyst. Also curbing demand is palm’s fat premium to soybean oil, it’s closest food and fuel substitute, which is “making palm less attractive to buyers and shifting preference toward alternative oils,” he said. Benchmark futures are down 1.8% this week, with the tropical oil currently at a premium of $106 a ton to rival soybean oil, compared to an average discount of around $29 over the past year. Still, palm’s losses are cushioned by tight supply from Malaysia, where heavy rains and flooding are disrupting harvesting, he said. “These supply constraints are keeping the market supported, despite weak demand,” he said. (Source:Bloomberg)
