MARKET DEVELOPMENT
VEGOILS-Palm Recovers From 2-Month Low as Crude Offsets Stocks Data
VEGOILS-Palm Recovers From 2-Month Low as Crude Offsets Stocks Data
12/04/2014 (Reuters) - Malaysian palm oil futures hit two-month lows before turning positive late on Friday, as lower comparative oils and crude prices offset industry stocks data from the previous session.
By the close, the benchmark June contract on the Bursa Malaysia Derivatives Exchange ended 0.2 percent higher at 2,614 ringgit ($810) per tonne, having earlier touched a low of 2,572 ringgit. Prices have fallen 0.8 percent this week.
Total traded volume stood at 38,792 lots of 25 tonnes, slightly above the average 35,000 lots.
"The market is consolidating after the run up to the MPOB (Malaysian Palm Oil Board) data," said a trader with a local commodities brokerage in Kuala Lumpur. "The market is seeing whether the 2,570 ringgit level can hold.
"With crude being at (above) $103 a barrel, it lends some support to palm oil prices," he said, adding that focus was now switching to export data due next week from Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance.
On Thursday, data showed that inventories in Malaysia, the world's second-largest producer, rose to 1.69 million tonnes in March, missing market estimates for a drop to a three-year low of 1.58 million tonnes.
The MPOB data also showed that crude palm oil production jumped 17 percent from a month ago, while export demand slackened by about 8 percent to only 1.30 million tonnes.
"Malaysia's palm oil stocks rose unexpectedly for the first time since Dec. 13 ... due mainly to stronger-than-expected recovery in palm oil output," said CIMB analyst Ivy Ng in a note. "But the market is likely to remain vigilant on the supply prospects as weather experts have recently raised the probability of an El Nino event in 2H14."
The U.S. weather forecaster said on Thursday the chances that the much-feared El Nino phenomenon that can wreak havoc on global crops would strike by the Northern Hemisphere summer exceeded 50 percent.
Technicals showed Malaysian palm oil has resumed its downtrend towards the Jan. 28 low of 2,519 ringgit, as it has completed a rebound from the April 8 low of 2,573 ringgit per tonne, said Reuters market analyst Wang Tao.
In addition to strong crude prices, a widening spread between palm oil and soybean oil was also bolstering palm prices, said a Jakarta-based trader.
In comparative vegetable oils, the U.S. soyoil contract for May fell 0.5 percent in late Asian trade, while the most active September soybean oil contract on the Dalian Commodities Exchange slipped 1.2 percent.
"At this level, buyers should come in again," he added.
Smaller supplies of the oilseed for crushing could potentially channel food and fuel demand to palm, a common substitute.
"On the demand side, export is weak ... but we believe that this is temporary as the bumper soybean crops from South America should only last until end-May," Kenanga Investment Bank analyst Alan Lim Seong Chun said in a note.
"Overall, we maintain our positive view on CPO prices in the mid to long term due to sustainable demand seen from Indonesia biodiesel industry and stable food demand."
Southeast Asia's biggest economy and the world's top producer of palm oil introduced a new regulation in August, aimed at burning more palm-based biodiesel and cutting its oil import bill.
In related markets, Brent oil futures dipped towards $107 a barrel on Friday, following a weaker outlook for 2014 global demand growth from the International Energy Agency and due to expectations that more Libyan crude will reach the market next week.
Palm, soy and crude oil prices at 1018 GMT
Contract Month Last Change Low High Volume
MY PALM OIL APR4 2650 -5.00 2650 2650 10
MY PALM OIL MAY4 2640 +13.00 2588 2642 1316
MY PALM OIL JUN4 2614 +5.00 2572 2616 17123
CHINA PALM OLEIN SEP4 6080 -126.00 6046 6160 664280
CHINA SOYOIL SEP4 6994 -86.00 6942 7040 655222
CBOT SOY OIL MAY4 42.26 -0.23 41.95 42.46 5639
NYMEX CRUDE MAY4 103.17 -0.23 103.01 103.42 16011
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 = 3.2230 Malaysian Ringgits) ($1 = 6.2125 Chinese Yuan)
By the close, the benchmark June contract on the Bursa Malaysia Derivatives Exchange ended 0.2 percent higher at 2,614 ringgit ($810) per tonne, having earlier touched a low of 2,572 ringgit. Prices have fallen 0.8 percent this week.
Total traded volume stood at 38,792 lots of 25 tonnes, slightly above the average 35,000 lots.
"The market is consolidating after the run up to the MPOB (Malaysian Palm Oil Board) data," said a trader with a local commodities brokerage in Kuala Lumpur. "The market is seeing whether the 2,570 ringgit level can hold.
"With crude being at (above) $103 a barrel, it lends some support to palm oil prices," he said, adding that focus was now switching to export data due next week from Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance.
On Thursday, data showed that inventories in Malaysia, the world's second-largest producer, rose to 1.69 million tonnes in March, missing market estimates for a drop to a three-year low of 1.58 million tonnes.
The MPOB data also showed that crude palm oil production jumped 17 percent from a month ago, while export demand slackened by about 8 percent to only 1.30 million tonnes.
"Malaysia's palm oil stocks rose unexpectedly for the first time since Dec. 13 ... due mainly to stronger-than-expected recovery in palm oil output," said CIMB analyst Ivy Ng in a note. "But the market is likely to remain vigilant on the supply prospects as weather experts have recently raised the probability of an El Nino event in 2H14."
The U.S. weather forecaster said on Thursday the chances that the much-feared El Nino phenomenon that can wreak havoc on global crops would strike by the Northern Hemisphere summer exceeded 50 percent.
Technicals showed Malaysian palm oil has resumed its downtrend towards the Jan. 28 low of 2,519 ringgit, as it has completed a rebound from the April 8 low of 2,573 ringgit per tonne, said Reuters market analyst Wang Tao.
In addition to strong crude prices, a widening spread between palm oil and soybean oil was also bolstering palm prices, said a Jakarta-based trader.
In comparative vegetable oils, the U.S. soyoil contract for May fell 0.5 percent in late Asian trade, while the most active September soybean oil contract on the Dalian Commodities Exchange slipped 1.2 percent.
"At this level, buyers should come in again," he added.
Smaller supplies of the oilseed for crushing could potentially channel food and fuel demand to palm, a common substitute.
"On the demand side, export is weak ... but we believe that this is temporary as the bumper soybean crops from South America should only last until end-May," Kenanga Investment Bank analyst Alan Lim Seong Chun said in a note.
"Overall, we maintain our positive view on CPO prices in the mid to long term due to sustainable demand seen from Indonesia biodiesel industry and stable food demand."
Southeast Asia's biggest economy and the world's top producer of palm oil introduced a new regulation in August, aimed at burning more palm-based biodiesel and cutting its oil import bill.
In related markets, Brent oil futures dipped towards $107 a barrel on Friday, following a weaker outlook for 2014 global demand growth from the International Energy Agency and due to expectations that more Libyan crude will reach the market next week.
Palm, soy and crude oil prices at 1018 GMT
Contract Month Last Change Low High Volume
MY PALM OIL APR4 2650 -5.00 2650 2650 10
MY PALM OIL MAY4 2640 +13.00 2588 2642 1316
MY PALM OIL JUN4 2614 +5.00 2572 2616 17123
CHINA PALM OLEIN SEP4 6080 -126.00 6046 6160 664280
CHINA SOYOIL SEP4 6994 -86.00 6942 7040 655222
CBOT SOY OIL MAY4 42.26 -0.23 41.95 42.46 5639
NYMEX CRUDE MAY4 103.17 -0.23 103.01 103.42 16011
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 = 3.2230 Malaysian Ringgits) ($1 = 6.2125 Chinese Yuan)