KUALA LUMPUR, May 29: Malaysian palm oil futures hit a two-month high on Wednesday, notching up five straight sessions of gains, as investors expect tight supplies to whittle down stocks in the world’s No.2 producer of the tropical oil.
Palm oil inventories in Malaysia now stand at 1.93 million tonnes, having dipped below the key psychological level of 2 million tonnes at the end of April. Despite softer exports, investors expect May’s output to be near-stagnant and help further trim stocks.
Market players are also pinning hopes on a pickup in demand ahead of the Muslim fasting month of Ramadan, which falls in July, as buyers restock.
‘Tight nearby supplies and short-covering are playing into palm oil prices,’ said a trader with a domestic commodities brokerage.
However, palm oil futures could head into a correction before rising again next month, the trader cautioned.
‘The faltering basis reinforces notions that futures are over-priced vis-Ga-vis palm oil fundamentals. We anticipate a mild correction before another rally towards 2,400 to 2,500 ringgit by end-June 2013.’
The benchmark August contract on the Bursa Malaysia Derivatives Exchange hit 2,420 ringgit ($791) per tonne in early trade, its highest since March 28, before settling at 2,419 ringgit for a rise of 1.3 percent by the midday break.
Total traded volumes stood at 16,542 lots of 25 tonnes each, higher than the average of 12,500 lots, as traders hedged positions.
Technicals showed palm oil was expected to rise into a range of 2,446 to 2,457 ringgit per tonne, as indicated by an inverted head-and-shoulders and a Fibonacci projection analysis, Reuters market analyst Wang Tao said.
Exports of Malaysian palm oil products fell between 2 percent and 5 percent in the first 25 days of May from a month ago, weighed down by weaker Chinese demand. But the decline was less than in the first 20 days, cargo surveyor data showed.
Total exports for May will be released on Friday.
In other markets, Brent crude futures steadied above $104 per barrel on Wednesday, as upbeat U.S. Housing and consumer confidence data sparked expectations of improved demand by the world’s top consumer.
In vegetable oil markets, U.S. Soyoil for July delivery gained 0.44 percent in early Asian trade. The most-active September soybean oil contract on the Dalian Commodities Exchange rose 1 percent.
(agencies)
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