Malaysian palm oil futures rose on Wednesday as buying interest surged after earlier losses, while hopes that near-stagnant output from the world’s No.2 producer would help ease inventories also underpinned sentiment.
But bleak economic data that stoked concerns about a slowdown in global demand for commodities kept a lid on gains.
“There hasn’t been any new developments in the market so it is drifting sideways these days. Overall there is pressure from the macro side — energy markets are under pressure, and you have China and German data not looking too good,” said a trader with a foreign commodities brokerage in Malaysia.
Growth in Chinese factories slowed to a crawl as export demand dwindled, according to HSBC’s flash PMI readings, while Germany, the euro zone’s largest economy, saw business activity slip for the first time in five months.
“Things are friendly for palm itself,” the trader added. “April’s exports will likely be around 1.5 million tonnes. We are looking at a two-three per cent rise in production, which would probably drop April’s end-stocks to a 1.9 million tonne level.” Stocks stood at 2.17 million tonnes in March.
The benchmark July contract on the Bursa Malaysia Derivatives Exchange edged up 0.8 per cent to close at RM2,290 per tonne.
It traded between RM2,260 and RM2,304. Total traded volumes stood at 24,635 lots of 25 tonnes each, lower than the average 35,000 lots.
Poor economic data from China, palm’s second largest buyer, may cap gains in crude palm oil prices, analysts said.
“With the latest HSBC Purchasing Manager’s Index for March … worse than the median expectation, concerns have been growing with regards to the sustainability of Chinese growth,” Phillip Futures said in a note on Wednesday.
Cargo surveyor data for the first 20 days of April showed that China has imported less palm products from Malaysia compared with the same period last month. Export data for April 1-25 will be released on Thursday.
But near-stagnant production should help offset lower export demand and ease inventory level to below the two million tonne mark.
In other markets, Brent crude rose above US$101 a barrel, drawing support from strong equity markets, but gains were capped by the gloomy economic data.
In other vegetable oil markets, US soyoil for July delivery gained 0.3 per cent in late Asian trade. The most-active September soybean oil contract on the Dalian Commodities Exchange slipped 1.3 per cent.– Reuters
Source : Business Times