Palm oil rebounds on strong demand outlook and weaker ringgit
19/09/2022 (The Malaysian Reserve) - PALM oil bounced back after slumping for two days on expectations of a rise in purchases by top consumers and as a weaker Malaysian currency made the tropical oil cheaper for overseas buyers.
Futures for November delivery surged as much as 3%, after the market in Kuala Lumpur resumed trading following a holiday on Friday, and the ringgit slipped for a fifth day. Palm fell 4.5% in two days through Thursday.
“The competition between Indonesian and Malaysian palm oil exports has intensified, but data show volumes from Malaysia in early September have been better than expected,” Chinese brokerage SHZQ Futures Co said in a note.
“The decline in Indonesia’s stockpiles in July also signals that the slump in palm oil prices may have been too fast,” it added.
Shipments of the world’s most-consumed cooking oil from Malaysia, the second-largest producer, surged 19% from a month earlier during the first half of September, according to cargo surveyor AmSpec Agri. In top grower Indonesia, stockpiles fell almost 12% to 5.91 million tonnes in July, according to the country’s palm oil group Gapki (Gabungan Pengusaha Kelapa Sawit Indonesia).
“Palm oil is tracking external markets for direction now,” said Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental Pte Ltd.
“An overnight rally in the soy complex and a weaker ringgit are supporting prices,” he said.
“The palm oil market seems to have priced in most of the negatives, and could even cross RM4,000 in the near term, but a rally is unlikely to be sustained due to some underlying weaknesses, such as rising reserves and production in Malaysia. Still, strong demand from India and China could put a floor under any selloff.” — Bloomberg