China vegoil futures plummet amid crude oil weakness

Futures for edible vegetable oils in China plummeted on Wednesday after a heavy selloff of crude oil futures late Tuesday amid mounting concerns of weaker demand.

Prices of soybean oil, palm oil and rapeseed oil futures listed in China plunged 8-10% across the board.

The most liquid palm oil futures contract on Dalian Commodity Exchange (DCE) slumped nearly 8% intraday to hit 7,764 yuan/ton ($1,157/ton), the lowest level in 2022 so far. The contract is down more than 36% month on month.

The whole curve was down as much as 10% during the trading session.

The bearishness in China came shortly after brent crude oil futures sank almost 8% late Tuesday as traders priced in rising risks of a global recession.

In addition to the macro weakness, bloating palm oil inventory in Indonesia has also piled pressure on prices.

“Because of the export limits previously, and the recent export ban caused their stocks to be pretty much full,” said one China-based oil trader. “There is a lot of pressure to sell now.”

As China is the world’s second largest palm oil importer after India, the bearish pressure at origin quickly spilled over.

DCE soybean oil futures also sank as much as 8% intraday across the curve with the main contract down touching a six-month low of 8,688 yuan/ton ($1,295/ton). The contract is down 27% in the past month.

Meanwhile, rapeseed oil futures on Zhengzhou Commodity Exchange (ZCE) also slid as much as 9% during the day.

Weaker oil futures are taking a toll on soybean crush margins in China with cargo buying demand for Brazilian and US crops mostly diminished.