Palm sees strongest gains in 2 weeks on falling stocks forecast

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KUALA LUMPUR (May 4): Malaysian palm oil futures clocked their strongest gain in two weeks in early trade on Friday, on expectations of falling inventories, after a sharp decline on Thursday evening and being largely range-bound this week.

The benchmark palm oil contract for July delivery on the Bursa Malaysia Derivatives Exchange was up 0.2% at 2,337 ringgit (US$594.35) a tonne at midday break, its biggest gain since April 20. It earlier fell to a low of 2,324 ringgit, its weakest level since August 2016. 

The market, however, fell 1.8% for the week so far, in line for a second consecutive weekly decline. 

Trading volume stood at 17,156 lots of 25 tonnes each at midday break.

"The market is up on expectations that end-stocks will drop," said a futures trader in Singapore. "Consumption could also be supported due to Ramadan," he said, referring to the Muslim fasting month, which begins in mid-May this year.

Ramadan typically leads to higher usage of palm oil for cooking in Muslim majority regions, which sees devotees break day-long fasts with communal feasting.

Malaysian palm oil inventories at end-April are expected to fall 4.1% to 2.23 million tonnes, its lowest in six months, according to a Reuters poll of nine traders, planters and analysts.

Meanwhile, the survey respondents also forecast that April exports will fall 5.5% on-month to 1.48 million tonnes, but output will remain flat at 1.57 million tonnes. 

Official data for the month of April is scheduled for release by industry regulator the Malaysian Palm Oil Board on May 10 at around 0430 GMT.

Another trader added that overnight gains in U.S. soyoil on the Chicago Board of Trade provided additional support to palm. 

The Chicago July soybean oil contract rose as much as 0.7% on Thursday, but was last down 0.4% on Friday.

In other related oils, the September soybean oil on China's Dalian Commodity Exchange fell 0.3%, while the Dalian September palm oil contract declined 0.8%.

Palm oil is impacted by movements in rival edible oils, as they compete for a share in the global vegetable oils market. 

 Palm, soy and crude oil prices, as of 0500 GMT

Contract Month Last Change Low High Volume
MY PALM OIL MAY8 0 +0.00 0 0 0
MY PALM OIL JUN8 2334 +5.00 2322 2338 1029
MY PALM OIL JUL8 2337 +5.00 2324 2342 7795
CHINA PALM OLEIN SEP8 4946 -40.00 4930 4958 272680
CHINA SOYOIL SEP8 5756 -16.00 5728 5770 238446
CBOT SOY OIL JUL8 30.7 +0.00 30.66 30.75 2587
INDIA PALM OIL MAY8 635.90 +2.80 633.00 636 162
INDIA SOYOIL MAY8 747.9 +1.60 746.5 748.9 830
NYMEX CRUDE JUN8 68.36 -0.07 68.33 68.66 26630

 Palm oil prices in Malaysian ringgit per tonne
 CBOT soy oil in U.S. cents per pound
 Dalian soy oil and RBD palm olein in Chinese yuan per tonne
 India soy oil in Indian rupee per 10 kg
 Crude in U.S. dollars per barrel
(US$1 = 3.9320 ringgit)
(US$1 = 66.6800 Indian rupees)
(US$1 = 6.3452 Chinese yuan)