MARKET DEVELOPMENT
Palm Oil Edges Lower
Palm Oil Edges Lower
24/07/2013 (DAWN.com) - Malaysian palm oil futures edged 0.6 per cent lower in tight trade on Tuesday over demand concerns, although losses were capped by expectations of disappointing output in July that would prevent a sudden rise in stocks.
Palm oil inventories in Malaysia eased to a two-year low of 1.65 million tonnes in June as demand during the holy month of Ramazan propped up exports and helped offset a rise in output.
Demand has since tapered off and exports have dropped about 14pc in the July 1-20 period from a month earlier. But traders say daily average shipments are still healthy and they would watch export data to gauge demand strength.
Investors expect July’s output to miss initial estimates as plantation workers get shorter hours during Ramadan. Workers in the top producing states on the island of Borneo also typically take longer leaves to return home.
“Production is a bit disappointing. We want to see whether output is coming in as expected, or a bit on the low side,” said a trader with a foreign commodities brokerage in Kuala Lumpur.
“The last five days of exports have been impressive. Some people are wondering whether this is going to be the trend for the rest of the month. If this kind of rate continues we might even see good exports.” The benchmark October contract on the Bursa Malaysia Derivatives Exchange fell 0.6pc to close at 2,258 ringgit ($711) per tonne.
Prices were stuck in a tight range between 2,251 and 2,283 ringgit. Total traded volume stood at 34,198 lots of 25 tonnes each, in line with the average 35,000 lots. Rising crude oil prices have burnished the appeal of palm oil as a cheaper alternative biofuel, supporting the tropical oil.
“The rebound in palm oil prices resulted from gains in crude oil prices. When crude oil prices soar, demand for palm oil as biofuel would increase,” Singapore-based Phillip Futures said in a note.
Palm oil inventories in Malaysia eased to a two-year low of 1.65 million tonnes in June as demand during the holy month of Ramazan propped up exports and helped offset a rise in output.
Demand has since tapered off and exports have dropped about 14pc in the July 1-20 period from a month earlier. But traders say daily average shipments are still healthy and they would watch export data to gauge demand strength.
Investors expect July’s output to miss initial estimates as plantation workers get shorter hours during Ramadan. Workers in the top producing states on the island of Borneo also typically take longer leaves to return home.
“Production is a bit disappointing. We want to see whether output is coming in as expected, or a bit on the low side,” said a trader with a foreign commodities brokerage in Kuala Lumpur.
“The last five days of exports have been impressive. Some people are wondering whether this is going to be the trend for the rest of the month. If this kind of rate continues we might even see good exports.” The benchmark October contract on the Bursa Malaysia Derivatives Exchange fell 0.6pc to close at 2,258 ringgit ($711) per tonne.
Prices were stuck in a tight range between 2,251 and 2,283 ringgit. Total traded volume stood at 34,198 lots of 25 tonnes each, in line with the average 35,000 lots. Rising crude oil prices have burnished the appeal of palm oil as a cheaper alternative biofuel, supporting the tropical oil.
“The rebound in palm oil prices resulted from gains in crude oil prices. When crude oil prices soar, demand for palm oil as biofuel would increase,” Singapore-based Phillip Futures said in a note.