Crude palm oil futures on Malaysia’s derivatives exchange fell below MYR2,400 a metric ton due to selling pressure related to concerns over China's tightening monetary policy, but came off lows in a bout of short covering.
Prices turned choppy during the afternoon session, moving between positive and negative territory but ending higher.
The benchmark April CPO contract on the Bursa Malaysia Derivatives ended MYR22 higher at MYR2,429/ton after moving in a range between MYR2,393-MYR2,438/ton.
"Gains on BMD were more of a technically-inspired rally. Global vegetable oil supply fundamentals remain bearish on prospects for a record South American soybean crop," a Kuala Lumpur-based trading executive said.
Investors were also concerned about China's future monetary policy measures, which have also affected most other commodity markets.
This year's soybean supply may be the key driver of prices in 2010, Barclays Capital said in a note.
With prospects for a large increase in global supply in the offing, prices of soybean and soybean products including soyoil may edge lover in the coming months. Brazilian and Argentine output will be flowing into markets in the first and second quarter this year, it said.
The soyoil price outlook influences palm oil prices as the vegetable oils compete for similar export markets.
During Asian trading hours, March soyoil on the Chicago Board of Trade fell as much as 30 points to 36.47 cents/pound. The March contract was last trading down 13 points from the overnight close at 36.64 cents/pound, down 13 points from the overnight close.
Palm oil's current supply fundamentals helped negate bearish cues from external markets and prevent a sharp decline in prices, due to a double-digit percentage decline in output in Jan. 1-25 from a month earlier, some traders said.
However, Indonesia's exports of CPO in 2010 may rise 16% on year to 18 million tons as prices are likely to remain within a range favored by palm oil buyers, Joko Supriyono, secretary-general of the Indonesian Palm Oil Association said.
In 2009, Indonesia exported an estimated 15.5 million tons, an increase of 12% over 13.8 million tons in 2008, he said.
In the cash market, palm olein for April/May/June traded at $752.50/ton and $747.50/ton, free-on-board Malaysian ports, a Singapore-based trader said.
Cash CPO for prompt delivery was offered MYR10 higher at MYR2,450/ton.
Open interest on the BMD was 73,799 lots, up from 72,657 lots traded Tuesday. One lot is equivalent to 25 tons.
A total of 20,285 lots of CPO were traded versus 23,684 lots Monday.
Closing BMD Crude Palm Oil (CPO) futures prices in MYR/ton at 1000 GMT: Month Close Previous Change High Low Feb 2010 2,425 2,420 Up 05 2,431 2,397 Mar 2010 2,429 2,410 Up 19 2,432 2,395 Apr 2010 2,429 2,407 Up 22 2,438 2,393 May 2010 2,430 2,411 Up 19 2,436 2,396
-By Shie-Lynn Lim, Dow Jones Newswires; +60 3 2026 1233; shie-lynn.lim@dowjones.com
(END) Dow Jones Newswires
January 27, 2010 05:53 ET (10:53 GMT)
Copyright (c) 2010 Dow Jones & Company, Inc.
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