Crude palm oil futures on Malaysia’s derivatives exchange recovered lost ground to end higher Thursday due to spillover buying interest following a recovery in crude-oil prices, trading executives said.
The benchmark May contract on the Bursa Malaysia Derivatives settled 0.5% higher at MYR3,285 a metric ton after moving both ways.
After moving in negative territory for most of the Asian day, April crude oil on the New York Mercantile Exchange was trading 0.1% higher at $107.19 a barrel at 1000 GMT, when the BMD closed.
"The market is holding up, as people expect price-friendly forecasts by leading analysts at the palm oil conference [in Kuala Lumpur] next week," a physical market broker in Kuala Lumpur said.
Trading executives said refining margins in Malaysia have dwindled significantly after an export tax restructuring by top palm oil producer Indonesia made domestic refined palm oil products a cheaper alternative to those from Malaysia.
This prompted buyers to source cheaper Indonesian products, leading to a fall in Malaysian exports last month. But refiners aren't anxious to offer lower prices, which could push margins into negative territory given rising raw material prices, the Kuala Lumpur-based trader said. Cargo surveyors Intertek Agri Services and SGS said Wednesday that exports fell 9.5%-11% from a month earlier to 1.17 million-1.18 million tons.
Market participants said February stock levels were likely unchanged to moderately higher compared with the end-January level of 2.01 million tons, as export growth probably slumped more steeply than production. The Malaysian Palm Oil Board will issue its official estimates of output, exports and inventories on March 12.
In the cash market, refined palm olein for April shipment was traded at 1,120/ton, free on board Malaysian ports, said a physical market broker in Singapore.
Cash CPO for prompt shipment was unchanged at MYR3,240/ton.
Open interest on the BMD was 127,441 lots, versus 126,511 lots Wednesday. One lot is equivalent to 25 tons.
A total of 20,170 lots of CPO were traded versus 21,482 lots Wednesday.
Closing BMD Crude Palm Oil (CPO) futures prices in MYR/ton at 1000 GMT: Month Close Previous Change High Low Mar'12 3,255 3,225 +30 3,220 3,213 Apr'12 3,268 3,245 +23 3,248 3,221 May'12 3,285 3,270 +15 3,258 3,233 Jun'12 3,280 3,271 +9 3,260 3,235
-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233; shie-lynn.lim@dowjones.com
(END) Dow Jones Newswires
March 01, 2012 06:19 ET (11:19 GMT)
Copyright (c) 2012 Dow Jones & Company, Inc.
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