Crude palm oil futures on Malaysia’s derivatives exchange rose as much as 2.8% intraday to a two-month high Thursday, fuelled by increased demand in the physical market as countries in the region gear up for major festive periods.
The benchmark October contract on the Bursa Malaysia Derivatives exchange ended MYR62 or 2.5% higher at MYR2,519 a metric ton after rising to MYR2,520/ton, its highest level since May 11.
"Demand in the physical market has been good and this lent support," a senior executive at a Kuala Lumpur-based physical-market broker said.
Also supporting the rise in prices were expectations for weaker production due to lower yields in the top palm-oil producing state of Sabah, growers and trade participants said.
Preliminary data from an industry body Thursday said output so far this month has only risen 1.5% from the same period last month, which may lead to a drawdown in palm inventory levels as demand is likely to outpace supply.
With La Nina weather now underway, recent heavy rain in several oil-palm growing regions is already hurting output growth, although it is likely to boost yields in the future, an executive at a major Malaysian trading house said.
Crop data from the Malaysian Palm Oil Board earlier in the week showed weaker-than-expected output growth in June, while robust festive demand ahead of the Islamic fasting period starting next month is also supporting prices.
Pakistan, a major buyer of Malaysian palm oil, has likely purchased as much as 200,000 to 225,000 tons this month and may buy around 150,000 tons next month, Pakistan Edible Oil Refiners Association Vice Chairman Rasheed Janmohammad said recently.
In the cash market, palm olein for October/November/December was traded at $810/ton, free on board Malaysian ports, a Singapore-based trading executive said.
Cash CPO for prompt delivery was offered MYR50 higher at MYR2,580/ton.
CME Group Inc.'s dollar-based CPO futures weren't traded during Asian hours.
Rupiah-denominated October CPO futures on the Indonesia Commodity and Derivative Exchange were trading 2% higher at IDR6,780 a kilogram at 0928 GMT.
Open interest on the BMD was 68,575 lots compared with 68,667 lots Wednesday. One lot is equivalent to 25 tons.
A total of 26,561 lots of CPO were traded versus 16,473 lots Wednesday.
Closing BMD Crude Palm Oil (CPO) futures prices in MYR/ton at 1000 GMT: Month Close Previous Change High Low Aug'10 2,580 2,522 Up 58 2,580 2,517 Sep'10 2,533 2,483 Up 50 2,543 2,475 Oct'10 2,519 2,457 Up 62 2,525 2,450 Nov'10 2,517 2,452 Up 65 2,521 2,444
-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233; shie-lynn.lim@dowjones.com
(END) Dow Jones Newswires
July 22, 2010 06:24 ET (10:24 GMT)
Copyright (c) 2010 Dow Jones & Company, Inc.
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