KUALA LUMPUR: Palm oil futures rose to their highest level in more than a month on Thursday after poor Malaysian economic data weakened the ringgit and a surprise surge in China’s manufacturing sector fuelled demand hopes from the world’s No.2 palm oil buyer.
The ringgit dived to its lowest in more than three years on Thursday as investors turned skittish after Malaysia reported disappointing growth in its second quarter and revealed a shrinking current account surplus.
But the weak local currency makes the tropical oil cheaper for overseas buyers and refiners and could further boost exports which climbed between 10-12 per cent in the first 20 days of August compared to a month ago.
“The currency is one of the supportive factors for palm oil and it is holding prices above RM2,300,” said a trader with a foreign commodities brokerage.
“As the ringgit weakens, domestic prices of palm becomes cheaper and this will encourage exports,” the Kuala Lumpur-based trader added.
The benchmark November contract on the Bursa Malaysia Derivatives Exchange had climbed to RM2,347 per tonne in early trade, the highest since July 12.
Prices then moved to RM2,333 by the mid-day break to notch a 0.1 per cent loss.
Total traded volume stood at 19,751 lots of 25 tonnes each, higher than the usual 12,500 lots.
Technicals showed palm oil still looks neutral in a range of RM2,287-RM2,366 per tonne, and only an escape could point to a future direction, said Reuters market analyst Wang Tao.
Activity in China’s manufacturing sector hit a 4-month high in August, a preliminarily survey showed, reinforcing signs of an economic pick-up which would stoke edible oil demand as buyers re-stock ahead of the Mid-Autumn festival.
“China, the second-largest buyer of palm oil, is likely to boost palm oil demand with stronger economic data,” said Phillip Futures investment analyst Sim Han Qiang in a note on Thursday.
In other markets, Brent crude held above US$109 a barrel on Thursday as upbeat data from China kindled hopes for better demand from the world’s second largest oil consumer, but signs that OPEC producer Libya may resume exports dragged on prices.
In vegetable oil markets, the US soyoil contract for December edged down 0.3 per cent in early Asian trade.
The most-active January soybean oil contract on the Dalian Commodities Exchange also fell 0.3 per cent.– Reuters
Source : Business Times
