Palm Rises As Crude Bounces Back

KUALA LUMPUR, Oct 3 (Reuters) – Malaysian palm oil futures rose on Friday as crude oil bounced off a 27-month low, although the ringgit’s strength curbed the gains and pulled the tropical oil to its first weekly drop in five.

Brent crude oil futures edged up on Friday to around $93.50 a barrel after a three-day slide pushed prices to their lowest since 2012. The benchmark has fallen more than 15 percent this year as global supplies remained high despite rising conflict in the Middle East. O/R

Palm oil typically moves in sync with crude oil prices due to its rising use as a biofuel. Weaker crude oil prices makes the use of palm as a “green” alternative less attractive.

“The sharp rebound in crude oil overnight should kick back buying interest again, but the gains will be limited because of the ringgit,” said a palm oil trader with a foreign commodities brokerage in Kuala Lumpur. The Malaysian ringgit MYR=MY added 0.06 percent and trading at 3.275 per dollar at 0752 GMT on Friday. EMRG/FRX

The benchmark December contract FCPOc3 on the Bursa Malaysia Derivatives Exchange had inched up 1.1 percent to 2,170 ringgit ($666) per tonne by Friday’s close.

Prices were down 0.3 percent for the week to notch their first fall since early September.
Total traded volume stood at 29,596 lots of 25 tonnes each, well below the average 35,000 lots as most traders from the world’s biggest edible oil buyers were absent from the market.

Malaysian markets will be closed on Monday for a public holiday. China’s financial markets are closed from Oct. 1 to Oct. 7 for the National Day holiday, while Indian markets are also closed and will resume trading on Tuesday. 

The Kuala Lumpur-based trader added that the rise in palm prices may be capped at 2,170-2,190 ringgit ahead of the long weekend and as investors waited for more news on output and export demand in October. Technicals showed palm oil may retest support at 2,142 ringgit per tonne, a break below which will lead to a further loss towards 2,055 ringgit, said Reuters market analyst Wang Tao.  Anticipation of a bumper supply of soybeans from the United States and South America have kept traders on edge and dampened palm prices due to worries that buyers could shift to soyoil for food and fuel use. Despite big gains in September, palm has tumbled nearly 20 percent this year.

Some analysts, however, say prospects of frost in parts of the U.S. grain belt as well as flooding in Argentina could increase risks to the soybean harvest.

“We believe that USDA is likely to stop increasing its soybean production numbers in the next release and stop the pressure on soybean oil prices,” said Kenanga Investment Bank analyst Alan Lim.

“Overall, this is positive to crude palm oil prices as it is strongly correlated to soybean oil prices, as both are common substitutes for the food industry,” added Lim, who forecasts benchmark prices recovering to an average of 2,500 ringgit in the fourth quarter this year.

The U.S. soyoil contract for December BOZ4 rose 0.2 percent in late Asian trade.
Palm, soy and crude oil prices at 1006 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      OCT4    2193   +28.00    2150    2195     111
  MY PALM OIL      NOV4    2183   +22.00    2164    2190    2561
  MY PALM OIL      DEC4    2170   +24.00    2151    2177   17676
  CHINA PALM OLEIN JAN5       0    +0.00       0       0       0
  CHINA SOYOIL     JAN5    5898   +62.00    5890    5958  313544
  CBOT SOY OIL     DEC4   32.86    +0.00   32.69   33.03    4527
  INDIA PALM OIL   OCT4    0.00    +0.00    0.00    0.00       0
  INDIA SOYOIL     OCT4    0.00    +0.00    0.00    0.00       0
  NYMEX CRUDE      NOV4   90.90    -0.11   90.85   91.79   28052


Palm oil prices in Malaysian ringgit per tonne                                              ($1 = 3.256 Malaysian ringgit) 
CBOT soy oil in U.S. cents per pound                                           ($1 = 6.1395 Chinese yuan) 
Dalian soy oil and RBD palm olein in Chinese yuan per tonne                       ($1 = 61.61 Indian rupees)
India soy oil in Indian rupee per 10 kg
Crude in U.S. dollars per barrel

Source : REUTERS

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