Palm Futures Pare Losses As Nov Stocks Drop

Palm oil futures pared losses to end little changed yesterday after stockpiles in Malaysia, the second-largest producer, dropped in November as output declined the most in almost three years.

Inventories of the cooking oil declined 2 per cent to 1.93 million metric tons from a 10-month high in October, the
Malaysian Palm Oil Board said in a statement yesterday.

Production dropped 20 per cent to 1.6 million tons, while exports gained 1.5 per cent to 1.5 million tons, it said. The decrease in output was the most since December 2006, according to Bloomberg data.

February-delivery contract closed at RM2,521 a metric ton at the 6 pm close on the Malaysia Derivatives Exchange.

Futures pared losses and gained as much as 0.4 per cent to RM2,535 a ton yesterday afternoon session after the data was announced.

“Lower stockpiles will be supportive for prices and demand from India may stay particularly strong in the coming months,” Ben Santoso, an analyst at DBS Vickers Securities (Singapore) Pte Ltd, said by phone from Singapore.

“Inventory levels will continue to decline as the low production cycle kicks in.”

Palm oil, used as an alternative fuel, advanced 49 per cent this year as investors bought commodities as a haven from a weak dollar.

The commodity may climb to RM3,000 by March as drought disrupts supplies and demand grows in China and India, the biggest users, according to Dorab Mistry, director of Godrej International Ltd, one of India’s biggest edible oil buyers, last week.

Palm oil has lost 1.6 per cent this week and is headed for the first weekly loss in six.

Output in Malaysia may drop to 17.5 million tons this year from last year’s record 17.7 million tons, Mistry said. tree stress and dry weather from the developing El Nino has created a “pessimistic outlook” for output in the second half of 2010, he said on December 4.

The commodity will be supported early next year by lower- than-expected global soybean supply before coming under pressure as the South American harvest gets under way in the second quarter, DBS Vickers’ Santoso said.

Crude palm oil prices may average RM2,380 in 2010, compared with a forecast of RM2,300 this year, he said.

Palm oil exports from Malaysia fell 5.2 per cent to 399,575 tons in the first 10 days of December from the same period in November, independent market surveyor Societe Generale de Surveillance said in an e-mailed report in Kuala Lumpur.

That compares with 2.2 per cent increase in exports at 412,166 tons estimated by Intertek, a rival surveyor.

Source: Business Times

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