KUALA LUMPUR, July 23: Malaysian palm oil futures inched up in tight trade on Tuesday, as investors expected disappointing output of the tropical oil in July would prevent a sudden rise in stocks in the world’s second-biggest producer of the edible oil.
Palm oil inventories in Malaysia eased to a 2-year low of 1.65 million tonnes in June as demand during the Muslim holy month of Ramadan propped up exports and helped offset a rise in output.
Demand has since tapered off and exports have dropped about 14 percent in the July 1-20 period from a month ago. But traders say daily average shipments are still healthy and they will watch export data to gauge demand strength.
Investors expect July’s output to miss initial estimates as plantation workers get shorter hours during Ramadan. Workers in the top producing states on the island of Borneo also typically take longer stretches of leave to return home.
‘Production is a bit disappointing. We want to see whether output is coming in as expected, or a bit on the low side,’ said a trader with a foreign commodities brokerage in Kuala Lumpur.
‘The last 5 days of exports have been impressive. Some people are wondering whether this is going to be the trend for the rest of the month. If this kind of rate continues we might even see good exports.’
By the midday break, the benchmark October contract on the Bursa Malaysia Derivatives Exchange had gained 0.2 percent to reach 2,277 ringgit ($718) per tonne. Prices were stuck in a tight range between 2,251 and 2,283 ringgit.
Total traded volume stood at 12,658 lots of 25 tonnes each, slightly above the average 12,500 lots.
Technical analysis showed signals would be neutral for Malaysian palm oil as long as it stayed in a range of 2,234 to 2,295 ringgit per tonne, said Reuters market analyst Wang Tao.
Rising crude oil prices have also burnished the appeal of palm oil as a cheaper alternative biofuel, supporting the tropical oil.
‘The rebound in palm oil prices resulted from gains in crude oil prices. When crude oil prices soar, demand for palm oil as biofuel would increase,’ Phillip Futures said in a note.
In other markets, Brent crude futures hovered above $108 on Tuesday, buoyed by a weaker dollar as investors waited on U.S. crude inventory data for further clues to the demand outlook in the world’s largest oil consumer.
In vegetable oil markets, the U.S. Soyoil contract for December rose 0.5 percent in early Asian trade. The most-active January soybean oil contract on the Dalian Commodities Exchange gained 0.9 percent.
(AGENCIES)
Follow our WhatsApp channel