MARKET DEVELOPMENT
VEGOILS-Palm Oil Notches Biggest Gain in Over 4 Yrs on Indonesia's Subsidy Plan
VEGOILS-Palm Oil Notches Biggest Gain in Over 4 Yrs on Indonesia's Subsidy Plan
* Prices rise to 2,315 rgt, highest since Jan. 21
* Indonesia moves closer to raising biodiesel subsidies
* Palm oil to end rebound around 2,248 rgt -technicals
(Updates prices, adds trader comment)
06/02/2015 (Reuters) - Malaysian palm oil climbed more than 5 percent on Thursday, its biggest single-day gain since October 2010 as the market was buoyed by hopes a plan by the world's top producer Indonesia to increase biodiesel subsidies would make blending profitable and as technicals provided support.
The benchmark April contract rose as much as 5.05 percent to 2,315 ringgit ($648) per tonne, its highest since Jan. 21 and off a 1-1/2-month low of 2,106 ringgit reached last week.
"It's to do with the biodiesel issue in Indonesia, what the energy minister is proposing," said a trader with a foreign commodities brokerage in Kuala Lumpur. "I think basically because of that and then charting looks technically friendly."
Total traded volume stood at a whopping 91,129 lots of 25 tonnes, compared to the usual average of 35,000 lots by the end of the day.
Plans by President Joko Widodo's government to ramp up biodiesel subsidies passed another important legislative hurdle late on Wednesday, as an influential parliamentary committee backed a near-threefold increase.
The energy parliamentary committee agreed to increase Indonesia's biodiesel subsidy to 4,000 rupiah (32 U.S. cents) per litre from 1,500 rupiah per litre now, versus the original proposal of 5,000 rupiah per litre.
"That's the game changer," said another trader with a foreign commodities brokerage in Kuala Lumpur. "That's saying that biodiesel (blending) will work again."
A hike in subsidies could boost the use of palm oil for blending into biodiesel, a demand that dwindled after crude oil prices crashed 60 percent between June and late January.
The proposal, however, still needs approval from the parliamentary budget committee which is due to give its verdict later this month. Some market participants say the jump in palm futures on Thursday may have been overdone.
"There was some over-reaction, that's why prices went that high," said a third Kuala Lumpur-based trader.
Technicals showed that palm oil is expected to end its current rebound around a resistance at 2,248 ringgit per tonne, as indicated by its wave pattern and a Fibonacci ratio analysis, according to Reuters market analyst Wang Tao.
Meanwhile, oil prices fell on Thursday, extending big losses logged in the previous session as record high inventories in the United States coupled with concern over global demand cut short a four-day rally.
In other competing vegetable oil markets, the U.S. soyoil contract for March rose 2.84 percent, while the most active May soybean oil contract on the Dalian Commodities Exchange edged down 0.44 percent.
CBOT soy oil in U.S. cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
India soy oil in Indian rupee per 10 kg
Crude in U.S. dollars per barrel
($1 = 3.5700 ringgit)
($1 = 6.2516 Chinese yuan renminbi)
($1 = 61.8200 Indian rupees)
* Indonesia moves closer to raising biodiesel subsidies
* Palm oil to end rebound around 2,248 rgt -technicals
(Updates prices, adds trader comment)
06/02/2015 (Reuters) - Malaysian palm oil climbed more than 5 percent on Thursday, its biggest single-day gain since October 2010 as the market was buoyed by hopes a plan by the world's top producer Indonesia to increase biodiesel subsidies would make blending profitable and as technicals provided support.
The benchmark April contract rose as much as 5.05 percent to 2,315 ringgit ($648) per tonne, its highest since Jan. 21 and off a 1-1/2-month low of 2,106 ringgit reached last week.
"It's to do with the biodiesel issue in Indonesia, what the energy minister is proposing," said a trader with a foreign commodities brokerage in Kuala Lumpur. "I think basically because of that and then charting looks technically friendly."
Total traded volume stood at a whopping 91,129 lots of 25 tonnes, compared to the usual average of 35,000 lots by the end of the day.
Plans by President Joko Widodo's government to ramp up biodiesel subsidies passed another important legislative hurdle late on Wednesday, as an influential parliamentary committee backed a near-threefold increase.
The energy parliamentary committee agreed to increase Indonesia's biodiesel subsidy to 4,000 rupiah (32 U.S. cents) per litre from 1,500 rupiah per litre now, versus the original proposal of 5,000 rupiah per litre.
"That's the game changer," said another trader with a foreign commodities brokerage in Kuala Lumpur. "That's saying that biodiesel (blending) will work again."
A hike in subsidies could boost the use of palm oil for blending into biodiesel, a demand that dwindled after crude oil prices crashed 60 percent between June and late January.
The proposal, however, still needs approval from the parliamentary budget committee which is due to give its verdict later this month. Some market participants say the jump in palm futures on Thursday may have been overdone.
"There was some over-reaction, that's why prices went that high," said a third Kuala Lumpur-based trader.
Technicals showed that palm oil is expected to end its current rebound around a resistance at 2,248 ringgit per tonne, as indicated by its wave pattern and a Fibonacci ratio analysis, according to Reuters market analyst Wang Tao.
Meanwhile, oil prices fell on Thursday, extending big losses logged in the previous session as record high inventories in the United States coupled with concern over global demand cut short a four-day rally.
In other competing vegetable oil markets, the U.S. soyoil contract for March rose 2.84 percent, while the most active May soybean oil contract on the Dalian Commodities Exchange edged down 0.44 percent.
Palm, soy and crude oil prices at 1026 GMT
Contract Month Last Change Low High Volume
MY PALM OIL FEB5 2260 +67.00 2220 2260 70
MY PALM OIL MAR5 2318 +110.00 2215 2321 1854
MY PALM OIL APR5 2310 +111.00 2197 2315 43664
CHINA PALM OLEIN MAY5 4802 +36.00 4736 4826 479924
CHINA SOYOIL MAY5 5446 -24.00 5410 5492 500812
CBOT SOY OIL MAR5 31.41 +16.80 30.55 31.54 12852
INDIA PALM OIL FEB5 458.00 +16.80 445.00 458.80 3454
INDIA SOYOIL FEB5 629.10 +5.60 622.20 630.00 26030
NYMEX CRUDE MAR5 49.07 +0.63 47.36 49.37 58683
CBOT soy oil in U.S. cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
India soy oil in Indian rupee per 10 kg
Crude in U.S. dollars per barrel
($1 = 3.5700 ringgit)
($1 = 6.2516 Chinese yuan renminbi)
($1 = 61.8200 Indian rupees)