Palm oil jumps to near one-week high

Palm oil inches lower
Palm oil inches lower

October 01, 2013

Malaysian palm oil futures rose to their highest in nearly a week on Monday after the ringgit dropped in late trade, but weak US and Chinese soya markets capped gains and locked prices in a tight range. By the close, the benchmark December contract had inched up 0.4 percent to 2,325 ringgit ($713) per tonne on the Bursa Malaysia Derivatives Exchange. Prices reached as high as 2,327 ringgit, the highest since September 24.

In the morning session, the contract had fallen as low as 2,296 ringgit but turned up after Asian currencies fell on investor uncertainty about a US government shutdown and on disappointing Chinese factory activity data. A weaker local currency makes palm oil cheaper for overseas buyers and helps stoke demand.

But weak prices for soyaoil, which could channel some food and fuel demand away from palm oil, put a lid on gains and prevented prices from rallying. The US soyaoil contract for December fell 0.1 percent in late Asian trade, while the most-active January soyabean oil contract on the Dalian Commodities Exchange eased 0.7 percent. “The negative factor is weak global commodity prices like soyabean, soyabean oil and crude oil,” said a Kuala Lumpur-based trader at a foreign commodities brokerage.

“At the same time, there is weakness in the Malaysian ringgit, so the market is moving in a tight range.” The Malaysian ringgit and the Indonesian rupiah took the hardest hits. The ringgit slipped 1.03 percent to 3.2620 against the US dollar late on Monday, while the rupiah’s indicative prices fell to as low as 11,600, according to Thomson Reuters data.

Total traded volumes in the December palm oil contract amounted to 29,246 lots of 25 tonnes each, slightly below the average 35,000 lots. On the technical front, Malaysian palm oil is likely to consolidate in a range of 2,270 to 2,311 ringgit per tonne before either rebounding further or continuing to slide, said Reuters market analyst Wang Tao.

Palm also drew support from export demand. Shipments of Malaysian palm oil grew 2.1 percent in September compared with a month ago, cargo surveyor Intertek Testing Services said. Another cargo surveyor showed exports rose 1.0 percent for the same period. But investor fears over seasonally rising output in Southeast Asia and predictions that prices could hit fresh lows in the coming months dragged them down 3.3 percent for the month of September.

Forecasts of near-record US harvests also piled pressure on Chicago soyabeans, which hovered near one-month lows on Monday. Larger supplies of soyabeans for crushing into soyaoil could snatch demand away from palm oil. In other markets, Brent crude fell more than $1 to below $108 a barrel and was headed for its first monthly decline since May, as tensions over Iran eased and a potential US government shutdown clouded the outlook for demand. Palm oil is often used as a green alternative to crude oil for producing biofuels. Courtesy Reuters

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