Palm oil rises on declining output, technical buying

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KUALA LUMPUR (March 13): Malaysian palm oil futures rose on Monday, heading for their first gain in three sessions, on the back of slowing output and technical buying.

Benchmark palm oil futures for May delivery on the Bursa Malaysia Derivatives Exchange were up 0.6% at 2,788 ringgit (US$627.08) a tonne at the midday break.

Palm shed more than 3% last week, posting its biggest single-day drop in three weeks on Friday, on weakness in rival soyoil and poor demand.     

Traded volumes stood at 18,144 lots of 25 tonnes each at noon on Monday.

Palm oil futures were supported by indications that early March output was down, while technical buying also lifted the market, said a trader.   

"But I don't think this (output fall) is indicative as it is down, compared with early February figures, which were up sharply," said the trader.

Data from industry regulator the Malaysian Palm Oil Board (MPOB) showed that production in February fell 1.4% to 1.26 million tonnes, its lowest since March 2016, and its fifth consecutive monthly decline.

February inventories also fell to a six-year low of 1.46 million tonnes, down 5.3% on month. 

Output in Malaysia, the world's second largest palm producer after Indonesia, is seen recovering this year from the dry weather effects of a crop-damaging El Nino. Leading analysts at an industry conference last week expected that prices would drop to levels around 2,500 ringgit by mid-year, on a recovery in production.

Palm oil may revisit its Feb 28 low of 2,723 ringgit, as its downtrend from the Jan 18 high of 3,175 ringgit per tonne could have resumed, said Wang Tao, a Reuters market analyst for commodities and energy technicals.

In related vegetable oils, soybean oil on the Chicago Board of Trade rose 0.4%, while the May soybean oil contract on the Dalian Commodity Exchange dropped 0.1%.

The May contract for palm olein on the Dalian Commodity Exchange was up 0.4%.

Palm, soy and crude oil prices at 0532 GMT

Contract Month Last Change Low High Volume
MY PALM OIL MAR7 3000 +10.00 3000 3000 105
MY PALM OIL APR7 2868 +20.00 2841 2868 525
MY PALM OIL MAY7 2788 +17.00 2761 2788 8498
CHINA PALM OLEIN MAY7 5810 +32.00 5740 5810 305322
CHINA SOYOIL MAY7 6446 -2.00 6408 6462 241526
CBOT SOY OIL MAY7 32.82 +0.00 32.59 32.88 4058
INDIA PALM OIL MAR7 0.00 +0.00 0.00 0 0
INDIA SOYOIL MAR7 0 +0.00 0 0 0
NYMEX CRUDE APR7 48.09 -0.40 47.90 48.54 42117

 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 = 4.4460 ringgit)
(US$1 = 66.5300 Indian rupees)
(US$1 = 6.9051 Chinese yuan)