MARKET DEVELOPMENT
VEGOILS-Palm Ends Higher for First Time in 6 Days; Poised to Rebound Above 2,600 Rgt
VEGOILS-Palm Ends Higher for First Time in 6 Days; Poised to Rebound Above 2,600 Rgt
08/05/2014 (Reuters) - Malaysian palm oil futures ended higher for the first time in six days on Wednesday as the current weakness in the palm market attracted bargain hunters and prompted investors to cover short positions, although a strong ringgit put a lid on gains.
The benchmark July contract on the Bursa Malaysia Derivatives Exchange ended 0.4 percent higher at 2,578 ringgit ($793) per tonne on Wednesday, after trading between 2,565 and 2,585 ringgit.
Malaysian palm prices, which set the tone for global prices, had dropped five days out of six and hovered near three-month lows as declines in rival soyoil markets overseas dragged on the tropical oil.
Traders however say prices are poised to rebound above 2,600 ringgit as the fall in prices attracts short-covering, as well as bargain hunters looking for cheap deals.
"For the past one week the market has been depressed because of the bearishness in soy ... there will definitely be some short-covering taking place," said a trader with a foreign commodities brokerage in Kuala Lumpur.
"If this happens, prices could rebound back above 2,600 ringgit, and possibly go up to 2,650 ringgit."
However, lacklustre demand amid rising production could limit gains in palm, which is mainly grown in Indonesia and Malaysia.
"Demand is tapering off. Until we see good demand, the upside (on prices) will be capped," said another Malaysia-based trader.
A stronger ringgit also dragged on prices, making the ringgit-denominated palm feedstock more expensive for overseas investors and refiners.
The Malaysian ringgit gained as much as 0.4 percent to 3.2400 against the U.S. dollar on Wednesday, its strongest since April 21, helped by a better-than-expected trade surplus in March.
Indonesia's palm oil output is expected to exceed 28 million tonnes this year, industry groups said, adding any impact from the crop-damaging El Nino weather phenomenon forecast for this year is unlikely to affect production until 2015.
"Because of the good weather, and because we have enough water, we should see good production towards the second half of this year," the first trader added. "We should see better output numbers compared to last year, not only in Indonesia, but also in Malaysia."
Chinese palm oil imports could also take a hit as buyers in the second-largest consumer struggle for funding, a Reuters report showed, the latest casualty in Beijing's crackdown on commodity financing in the face of slowing domestic demand.
Total traded volumes were thin on Wednesday at only 29,436 lots of 25 tonnes, below the average 35,000 lots, as investors avoided risky bets ahead of a key industry stocks report due next Monday.
In other markets, Brent crude edged further above $107 a barrel on Wednesday, underpinned by rising tensions in Ukraine, though its premium over U.S. prices narrowed after an industry report showed a sharp draw in inventories in the world's largest oil consumer.
In competing vegetable oil markets, the U.S. soyoil contract for July edged up 0.1 in late Asian trade, while the most active September soybean oil contract on the Dalian Commodities Exchange fell 0.1 percent.
Palm, soy and crude oil prices at 1006 GMT
Contract Month Last Change Low High Volume
MY PALM OIL MAY4 2631 -1.00 2630 2660 94
MY PALM OIL JUN4 2602 +11.00 2589 2607 1935
MY PALM OIL JUL4 2578 +10.00 2565 2585 14989
CHINA PALM OLEIN SEP4 6002 +14.00 5972 6024 307938
CHINA SOYOIL SEP4 6822 -6.00 6804 6846 261212
CBOT SOY OIL JUL4 41.14 +0.03 41.06 41.26 4978
NYMEX CRUDE JUN4 100.41 +0.91 99.78 100.59 22145
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 = 6.2343 Chinese yuan)
($1 = 3.2500 Malaysian ringgit)
The benchmark July contract on the Bursa Malaysia Derivatives Exchange ended 0.4 percent higher at 2,578 ringgit ($793) per tonne on Wednesday, after trading between 2,565 and 2,585 ringgit.
Malaysian palm prices, which set the tone for global prices, had dropped five days out of six and hovered near three-month lows as declines in rival soyoil markets overseas dragged on the tropical oil.
Traders however say prices are poised to rebound above 2,600 ringgit as the fall in prices attracts short-covering, as well as bargain hunters looking for cheap deals.
"For the past one week the market has been depressed because of the bearishness in soy ... there will definitely be some short-covering taking place," said a trader with a foreign commodities brokerage in Kuala Lumpur.
"If this happens, prices could rebound back above 2,600 ringgit, and possibly go up to 2,650 ringgit."
However, lacklustre demand amid rising production could limit gains in palm, which is mainly grown in Indonesia and Malaysia.
"Demand is tapering off. Until we see good demand, the upside (on prices) will be capped," said another Malaysia-based trader.
A stronger ringgit also dragged on prices, making the ringgit-denominated palm feedstock more expensive for overseas investors and refiners.
The Malaysian ringgit gained as much as 0.4 percent to 3.2400 against the U.S. dollar on Wednesday, its strongest since April 21, helped by a better-than-expected trade surplus in March.
Indonesia's palm oil output is expected to exceed 28 million tonnes this year, industry groups said, adding any impact from the crop-damaging El Nino weather phenomenon forecast for this year is unlikely to affect production until 2015.
"Because of the good weather, and because we have enough water, we should see good production towards the second half of this year," the first trader added. "We should see better output numbers compared to last year, not only in Indonesia, but also in Malaysia."
Chinese palm oil imports could also take a hit as buyers in the second-largest consumer struggle for funding, a Reuters report showed, the latest casualty in Beijing's crackdown on commodity financing in the face of slowing domestic demand.
Total traded volumes were thin on Wednesday at only 29,436 lots of 25 tonnes, below the average 35,000 lots, as investors avoided risky bets ahead of a key industry stocks report due next Monday.
In other markets, Brent crude edged further above $107 a barrel on Wednesday, underpinned by rising tensions in Ukraine, though its premium over U.S. prices narrowed after an industry report showed a sharp draw in inventories in the world's largest oil consumer.
In competing vegetable oil markets, the U.S. soyoil contract for July edged up 0.1 in late Asian trade, while the most active September soybean oil contract on the Dalian Commodities Exchange fell 0.1 percent.
Palm, soy and crude oil prices at 1006 GMT
Contract Month Last Change Low High Volume
MY PALM OIL MAY4 2631 -1.00 2630 2660 94
MY PALM OIL JUN4 2602 +11.00 2589 2607 1935
MY PALM OIL JUL4 2578 +10.00 2565 2585 14989
CHINA PALM OLEIN SEP4 6002 +14.00 5972 6024 307938
CHINA SOYOIL SEP4 6822 -6.00 6804 6846 261212
CBOT SOY OIL JUL4 41.14 +0.03 41.06 41.26 4978
NYMEX CRUDE JUN4 100.41 +0.91 99.78 100.59 22145
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 = 6.2343 Chinese yuan)
($1 = 3.2500 Malaysian ringgit)