25/05/2011 (Business Recorder) - Malaysian palm oil futures edged up on Tuesday, as investors positioned themselves ahead of export data later this week, though lingering worries about euro zone debt capped gains.

The benchmark August crude palm oil contract on the Bursa Malaysia Derivatives exchange closed 0.8 percent higher at 3,380 ringgit ($1,104) a tonne.
 
Traded volumes were thin at 8,104 lots at 25 tonnes each, compared with a total, and more than two-week high, at 17,205 lots from Monday.
 
‘Everything else is positive - even crude oil came up a little bit,’ said one trader. ‘Volumes are very small and we are waiting for the export rumours.’
 
‘Exports would have to be very good in order to stir this market further,’ he added. ‘Those (euro zone) worries are also still at the back of everyone's mind.’
 
Brent crude futures rose more than a dollar on Tuesday, as Goldman Sachs raised its forecast for the benchmark and the prospect of strong oil demand trimming inventories overrode concerns about Europe's debt crisis.
 
The most-active January 2012 soyoil on the Dalian Commodity Exchange traded at 10,220 yuan versus an open at 10,156 yuan.
 
ICDX's August CPO futures contract ended at 9,800 rupiah per kg versus 9,790 rupiah per kg when it opened. Market volume was 1,536 lots of 10 tonnes each.
 
Cargo surveyors Intertek Testing Service and Societe Generale de Surveillance are due to issue May 1-25 palm oil export data on Wednesday, at 0130 GMT and 0630 GMT, respectively.
 
‘I'm not so bullish,’ said a Kuala Lumpur-based analyst. ‘Second half production should improve and stocks should increase.’
 
‘There will be less speculation out there, and greater adversity to risky assets,’ he said referring to the second half of 2011. ‘Palm oil will probably go down to 3,000-3,200 ringgit.’
 
Palm oil, used in products such as food, cosmetics, tyres and biofuels, has slipped almost 11 percent so far this year. Last week, palm oil gained more than 3 percent as exports played catch up with growing production.

Palm oil prices fell about 1 percent on Monday, due to renewed worries about euro-zone debt hitting risk sentiment.
 
Financial markets paused for breath on Tuesday after being battered a day earlier on euro zone debt concerns, with new warnings about contagion fuelling fears the crisis is heading for a new, more dangerous phase.
 
‘We argue that the demand and supply dynamics indicate a high risk of a trend reversal, with substantial downside remaining to the CPO price,’ Royal Bank of Scotland said in a recent note.

‘We have continuing economic and sovereign-risk difficulties in Europe, a region that accounted for 13 percent of CPO consumption in 2010.’
 
Also in the second half of the year, Indonesia and Malaysia, the top two global palm oil producers, will enter a higher production cycle, which may weigh on prices.
 
RBS analysts added that they expect crude palm oil prices to fall as much as 30 percent from current levels on excess supply.
 
In related news, investors are still analysing the impact of a freshly signed two-year moratorium on some forest cutting in Indonesia from Friday.

‘It has already been factored into the market but maybe longer term there may be some issues,’ one analyst said. ‘Increasingly, people have to look beyond Indonesia now to find new areas to plant -- Africa is the new frontier.’