Palm Oil Futures Reflects Supply Tightness

MALAYSIA’S palm oil futures ended down 0.41 per cent yesterday pressured by weaker rival soyoil and due to a stronger ringgit currency, but expectations of stronger exports narrowed loses, traders said. The benchmark May crude palm oil futures on the Bursa Malaysia Derivatives Exchange fell 0.41 per cent, or RM11, to RM2,649 per tonne after hitting a low of RM2,620 on the day. “Physical availability of palm oil is limited,” said one trader at a local brokerage firm in Kuala Lumpur, and supplies for prompt shipment are tight, which should push up futures.

“The (futures) market will reflect tightness in the physical market, especially the nearby months,” once positions have been liquidated, the trader said, adding that the stronger ringgit and weak soyoil prices have pushed down the market. Trades volumes were 17,107 lots of 25 tonnes each, compared to the usual 10,000 lots. The ringgit gained almost half a per cent to 3.302 per US dollar, its highest level since Aug. 2008, as offshore investors bought in anticipation of further interest rate rises by the central bank after last week’s surprise move. A stronger ringgit makes the vegetable oil more expensive for overseas buyers. An expectation of better exports for the first fifteen days in March helped support the market, another trader said. Players expect exports to reach 660,000 tonnes in 1-15 March, up from 607,660 tonnes in the same period in February, the second trader said. Cargo surveyors are due to announce the exports data on Monday. Oil was steady above US$82 (US$1.00 = RM3.34) yesterday, poised for a second consecutive weekly increase, on a weakening US dollar and as views emerged that energy demand would continue to grow in the developing world. Source : Business Times

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