January 24, 2013
Malaysian palm oil rose to a near three-week high on Wednesday, after edging lower in the morning session, as prices drew support from concerns over bad weather hurting the global supply of edible oils. Drought in Argentina and southern Brazil, the world’s major soy producers, as well as dryness in the grain-producing parts of the United States, have sparked shortage worries and raised prices of these commodities, in turn supporting palm oil.
“Prices succumbed to some early profit-taking after hitting a fresh 2-week high yesterday,” said a trader with a Malaysian commodities brokerage in Kuala Lumpur, referring to prices trading lower in the morning session. “A forecast for tight US and global supplies of grains should support the market,” he said. “An upward rally will hinge on whether speculators step back in.”
By the close, the benchmark April contract on the Bursa Malaysia Derivatives Exchange was up 0.6 percent at 2,479 ringgit ($815) per tonne, slightly lower than its intraday high at 2,488 ringgit per tonne, a level unseen since January 4. Total traded volumes stood at 50,452 lots of 25 tonnes each, more than double the usual 25,000 lots, as some traders squared their positions ahead of a public holiday on Thursday.
Technical analysis shows palm oil is likely to test a resistance at 2,486 ringgit per tonne, as it has cleared another at 2,449 ringgit, said Reuters market analyst Wang Tao. Seasonal slowing production in Malaysia, the world’s No 2 producer, could help ease a record stockpile of 2.63 million tonnes, but weak demand from top buyers China and India could cause a repeat of the double-digit export slide during the first twenty days of January.
Malaysia will retain its crude palm oil tax at zero percent in February in a move to stoke demand, but cargo surveyor data showed disappointing palm oil imports in China, which analysts linked to the republic “getting serious” about import rules, as well as low northern temperatures that will solidify the oil.
On Tuesday, Hamburg-based oilseed analysts Oil World forecast that global edible oil importers were likely to boost purchases of low-priced palm oil in coming months, turning away from soyaoil and other more expensive seed-based oils. In competing vegetable oil markets, US soyaoil for March delivery edged up 0.2 percent in late Asian trade. The most active May soybean oil contract on the Dalian Commodity Exchange closed 0.3 percent higher.