Crude palm oil futures on Malaysia’s derivatives exchange ended higher Thursday as investors covered shorts, taking cues from higher crude prices and uncertainty over July’s production potential despite the weak exports outlook and a likely rise in India’s domestic supplies.
The benchmark October contract on the Bursa Malaysia Derivatives exchange ended MYR19 higher at MYR2,514 a metric ton after moving in a MYR2,506-MYR2,529 range.
Traders said Malaysia's palm oil exports for July will likely fall slightly from June's figure at 1.44 million tons.
Still, demand in the physical market had been active and this has prevented prices from tumbling below the psychological level of MYR2,500/ton today.
"Many buyers were concerned that the adverse weather effects may drag down supplies (of palm). Hence the strong buying interest in the market for the past few days," said a Singapore-based trading executive.
September crude on the New York Mercantile Exchange was trading 26 cents higher at $77.26 a barrel at 0952 GMT.
CPO prices may stay firm, moving between MYR2,450 and MYR2,600 during the third quarter of 2010 even as palm trees enter the high production cycle, as adverse weather conditions and biological tree stress may temper growth.
"Dependency on palm oil will rise on tight soybean supply despite strong production. The new soy crop isn't going to hit the market for next two months, while old stocks are running low as crushing increases. The edible oils market may be highly dependent on palm oil at least for the next 2-3 months," said an analyst at Kuala Lumpur-based broking house UOB Kay Hian.
Still, some traders said the upside potential for CPO may be capped because palm olein is currently offered at a very narrow discount, of $10-$15/ton to rival soyoil. Cash palm olein's discount to crude soyoil used to be around $100/ton in December.
In the cash market, palm olein for September was traded several times at $830/ton, October/November/December shipment at $812.50/ton, $817.50/ton, $820/ton and $822.50/ton and January/February/March at $820/ton, free on board Malaysian ports, a Singapore-based broker said.
Cash CPO for prompt delivery was offered MYR20 higher at MYR2,600/ton.
CME Group Inc.'s dollar-based CPO futures for October contract was trading $15.25 higher at $789.25 compared with Wednesday's close at $774/ton at 0932 GMT.
Rupiah-denominated October CPO futures on the Indonesia Commodity and Derivative Exchange were trading 0.3% higher at IDR6,905 a kilogram at 0930 GMT.
Open interest on the BMD was 69,423 lots, versus 69,238 lots Wednesday. One lot is equivalent to 25 tons.
A total of 13,047 lots of CPO were traded versus 10,792 lots Wednesday.
Closing BMD Crude Palm Oil (CPO) futures prices in MYR/ton at 1000 GMT: Month Close Previous Change High Low Aug'10 2,585 2,571 14 2,600 2,571 Sep'10 2,542 2,528 14 2,560 2,538 Oct'10 2,514 2,495 19 2,529 2,506 Nov'10 2,506 2,487 19 2,521 2,497
-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233; shie-lynn.lim@dowjones.com
(END) Dow Jones Newswires
July 29, 2010 06:15 ET (10:15 GMT)
Copyright (c) 2010 Dow Jones & Company, Inc.
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