MARKET DEVELOPMENT
VEGOILS-Palm Oil Eases, But Investors Bullish on Smaller Output Hopes
VEGOILS-Palm Oil Eases, But Investors Bullish on Smaller Output Hopes
19/11/2013 (Reuters) - Malaysian palm oil futures ended lower on Monday as traders booked profits after strong gains last week, but the prospect of seasonally weaker output in the world's top producers, Indonesia and Malaysia, buoyed prices.
Palm oil prices soared 4.1 percent last week, fuelled by fears that super typhoon Haiyan had caused severe damage to coconut crops in the Philippines, disrupting coconut oil supply from the world's biggest exporter and shifting demand to palm-based substitutes.
"Prices have gone up too fast and it's only proper that the market consolidates," said a trader with a local commodities brokerage.
"But since we don't see a major pick up in production, investors are taking a very bullish stance, especially as we get into the first quarter of the year - where production always dips," the Malaysia-based trader said.
"Based on this, after all this consolidation, the market will gradually go close to 2,700 ringgit, maybe even 2,800 ringgit in the first quarter of 2014."
By Monday's close, the benchmark February contract on the Bursa Malaysia Derivatives Exchange had fallen 0.9 percent to 2,590 ringgit ($814) per tonne. Prices were stuck in a range of 2,577-2,597 ringgit.
Total traded volume stood at 42,523 lots of 25 tonnes each, much higher than the average 35,000 lots.
A stronger ringgit also weighed on prices. The Malaysian currency gained 0.45 percent to 3.1880 against the greenback late Monday, making the ringgit-priced feedstock more expensive for overseas buyers.
Palm's export demand will also be in focus in November and December. Demand typically softens as countries in the northern hemisphere approach winter and buyers cut back purchases of the tropical oil that solidifies in cold temperatures.
But investors are hoping that China, the world's second largest palm oil buyer, will continue to import palm as buyers re-stock ahead of the start of the Lunar New Year festival in January.
Technicals showed that Malaysian palm oil is expected to test support at 2,565 ringgit per tonne, with a good chance of breaking this level and falling towards 2,506 ringgit, said Reuters market analyst Wang Tao.
In other markets, Brent crude dropped below $108 a barrel on Monday as traders focused on a surge in Saudi exports in the third quarter, while hopes that a resumption of talks between sanctions-hit Iran and major powers may lead to more oil supply also weighed.
In competing vegetable oil markets, the U.S. soyoil contract for December was flat in late Asian trade. The most active May soybean oil contract on the Dalian Commodities Exchange fell 1.5 percent.
Palm, soy and crude oil prices at 1006 GMT
Contract Month Last Change Low High Volume
MY PALM OIL DEC3 2585 -29.00 2573 2593 239
MY PALM OIL JAN4 2591 -22.00 2577 2597 9968
MY PALM OIL FEB4 2590 -24.00 2577 2597 17371
CHINA PALM OLEIN MAY4 6242 -62.00 6236 6282 517320
CHINA SOYOIL MAY4 7178 -108.00 7174 7228 729808
CBOT SOY OIL DEC3 40.46 -0.01 40.37 40.75 5748
NYMEX CRUDE DEC3 93.53 -0.31 93.35 93.84 9223
Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in U.S. cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
Crude in U.S. dollars per barrel
($1 = 3.18 Malaysian ringgit)
Palm oil prices soared 4.1 percent last week, fuelled by fears that super typhoon Haiyan had caused severe damage to coconut crops in the Philippines, disrupting coconut oil supply from the world's biggest exporter and shifting demand to palm-based substitutes.
"Prices have gone up too fast and it's only proper that the market consolidates," said a trader with a local commodities brokerage.
"But since we don't see a major pick up in production, investors are taking a very bullish stance, especially as we get into the first quarter of the year - where production always dips," the Malaysia-based trader said.
"Based on this, after all this consolidation, the market will gradually go close to 2,700 ringgit, maybe even 2,800 ringgit in the first quarter of 2014."
By Monday's close, the benchmark February contract on the Bursa Malaysia Derivatives Exchange had fallen 0.9 percent to 2,590 ringgit ($814) per tonne. Prices were stuck in a range of 2,577-2,597 ringgit.
Total traded volume stood at 42,523 lots of 25 tonnes each, much higher than the average 35,000 lots.
A stronger ringgit also weighed on prices. The Malaysian currency gained 0.45 percent to 3.1880 against the greenback late Monday, making the ringgit-priced feedstock more expensive for overseas buyers.
Palm's export demand will also be in focus in November and December. Demand typically softens as countries in the northern hemisphere approach winter and buyers cut back purchases of the tropical oil that solidifies in cold temperatures.
But investors are hoping that China, the world's second largest palm oil buyer, will continue to import palm as buyers re-stock ahead of the start of the Lunar New Year festival in January.
Technicals showed that Malaysian palm oil is expected to test support at 2,565 ringgit per tonne, with a good chance of breaking this level and falling towards 2,506 ringgit, said Reuters market analyst Wang Tao.
In other markets, Brent crude dropped below $108 a barrel on Monday as traders focused on a surge in Saudi exports in the third quarter, while hopes that a resumption of talks between sanctions-hit Iran and major powers may lead to more oil supply also weighed.
In competing vegetable oil markets, the U.S. soyoil contract for December was flat in late Asian trade. The most active May soybean oil contract on the Dalian Commodities Exchange fell 1.5 percent.
Palm, soy and crude oil prices at 1006 GMT
Contract Month Last Change Low High Volume
MY PALM OIL DEC3 2585 -29.00 2573 2593 239
MY PALM OIL JAN4 2591 -22.00 2577 2597 9968
MY PALM OIL FEB4 2590 -24.00 2577 2597 17371
CHINA PALM OLEIN MAY4 6242 -62.00 6236 6282 517320
CHINA SOYOIL MAY4 7178 -108.00 7174 7228 729808
CBOT SOY OIL DEC3 40.46 -0.01 40.37 40.75 5748
NYMEX CRUDE DEC3 93.53 -0.31 93.35 93.84 9223
Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in U.S. cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
Crude in U.S. dollars per barrel
($1 = 3.18 Malaysian ringgit)