MALAYSIAN palm oil futures edged up yesterday, but ended off new five-week highs notched earlier in the session, as a pull back in crude oil markets erased some gains in vegetable oil prices.
The rise in US crude inventories darkened prospects for biodiesel demand for vegetable oils, offsetting improved economic reports from the US to China that increased expectations of strong food demand, traders said.
The benchmark October contract on Bursa Malaysia’s Derivatives Exchange hit a session high of RM2,345, a level unseen since June 26, but settled at RM2,304 when crude oil fell.
“The palm oil market is ripe for a correction after jumping more than 150 points since the start of the week and it is still more attractive, holding a US$160 (US$1 = RM3.54) discount a tonne to soyaoil,” a trader with a foreign commodities brokerage said.
“Some forecasts made today were rather supportive but it became an excuse to take profits in the build-up in gains,” said another trader.
Leading analyst Dorab Mistry said yesterday palm oil prices were expected to trade between RM2,100 and RM2,300 per tonne for the next few weeks on festival demand and tight stocks.
More palm oil product deals were expected in the less than three weeks leading up to festivals, starting with Ramadan and ending with China’s mid-Autumn festival in early October.
Ramadan, the Muslim holy month where fasts in the day are followed by feasts in the evening, will see a majority of the plantation workers in top producers Indonesia and Malaysia taking leave as well as spur orders from overseas Muslim buyers.
And an unseasonally low rise in Malaysian palm oil stocks this year will boost the premium of palm over crude oil prices, meaning palm could rise over US$800 a tonne by the end the year with Brent crude oil at US$70, analyst James Fry said.
But US and Brent crude oil markets easing yesterday although staying above US$70 a barrel, dented some sentiment for vegetable oils like soyaoil and rapeseed, which are increasingly channelled into the biofuel sector in Europe and South America. Source : Business Times
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