SINGAPORE, July 18: Malaysian palm oil futures edged higher on Thursday after a price slump this week to seven-month lows attracted buyers, but gains were capped by lingering concerns over weak demand and rising output.
Slowing demand after the start of Ramadan slashed Malaysian palm oil exports during the first half of July, while the start of a higher production cycle in the second half of the year also raised prospects of higher inventory levels this month.
‘The market fell quite a lot on Monday and Tuesday and that brought in some buying interest,’ said a trader with a foreign commodities brokerage in Kuala Lumpur. ‘But concerns remain over slowing demand, especially when production picks up in the second half of the year.’
By the midday break, the benchmark October contract on the Bursa Malaysia Derivatives Exchange had gained 1.3 percent to 2,279 ringgit ($713) per tonne. Prices hit their lowest level this year on Tuesday on bearish fundamentals.
Total traded volume stood at 23,591 lots of 25 tonnes each, well above the usual 12,500 lots. Prices moved between 2,248 to 2,281 ringgit.
Analysts said concerns over weaker demand from major buyers China and India in the second half of the year could lead to further weakness for palm oil prices, which have fallen nearly 6 percent so far this year.
‘We believe the resilience of crude palm oil (CPO) imports to the world’s top market, India, could be dented by the steep depreciation of the Indian rupee,’ said Standard Chartered analyst Abah Ofon in a report.
‘This, coupled with a potentially large edible oilseed harvest in 2013/14 and renewed concerns about demand from China, suggests that the CPO market will need to adjust lower,’ he added. China is the world’s second-largest palm oil buyer after India.
Technicals showed palm oil is biased to test a support at 2,233 ringgit per tonne, as indicated by its wave pattern and a Fibonacci projection analysis, said Reuters market analyst Wang Tao.
In other markets, Brent futures slipped on the back of a stronger dollar, but held above $108 a barrel as a drawdown in U.S. Stockpiles for a third week buoyed hopes of a steady revival in demand growth.
In vegetable oil markets, the U.S. Soyoil contract for December was up 0.1 percent in early Asian trade. The most-active January soybean oil contract on the Dalian Commodities Exchange was almost flat.
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=3.197 ringgit)
(AGENCIES)
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