Palm rises to over 3-wk high on export jump; investors wary of swelling stocks

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KUALA LUMPUR (Sept 11): Malaysian palm oil futures rose to a more-than-three-week high on Thursday, lifted by hopes that demand might be picking up after a jump in exports, although caution over palm stocks that have swollen past 2 million tonnes kept a lid on gains.

Shipments of Malaysian palm oil products surged about 40 percent in the first 10 days of September compared to the same period in August, cargo surveyors reported, after the No.2 producer said it would temporarily scrap export duties for the crude grade.      

"The zero export tax move came in and changed sentiment to supportive," said a trader with a foreign commodities brokerage in Kuala Lumpur. "We anticipate exports of crude palm oil in September and October will be much better."

The removal of export taxes for those two months could stoke demand for crude palm oil (CPO) from key buyers overseas and keep prices from slipping below the 2,000 ringgit mark, analysts said.

"We expect the news to have a positive impact on CPO prices as it should encourage demand from countries that may prefer CPO against refined palm oil, such as India and China," said Kenanga Investment Bank analyst Alan Lim.

Market players said aggressive buying in the cash market also helped push up palm prices in late trade.

The benchmark November contract on the Bursa Malaysia Derivatives Exchange had inched up 1.9 percent to 2,072 ringgit ($649) per tonne by Thursday's close, after hitting a Aug. 20 high of 2,073 ringgit.

Total traded volume stood at 39,439 lots of 25 tonnes, above the average 35,000 lots.  

Technicals showed that palm oil was expected to retest resistance at 2,055 ringgit per tonne, a break above which would lead to a further gain towards 2,142 ringgit, said Reuters market analyst Wang Tao.    

While the rebound in exports supported prices, which have slid 22 percent in 2014, a surprise surge in palm oil stocks curbed gains.

Industry data showed Malaysian palm oil stocks surpassed market estimates and climbed to 2.05 million tonnes at the end of August, the highest in more than a year, after favourable weather boosted production of the tropical oil.

"The higher-than-expected palm oil inventory is negative for CPO prices as it suggests there is ample supply of edible oils in the near term, which may cause certain buyers to defer their purchases," said CIMB analyst Ivy Ng.

Ng added that rising production could drive Malaysian palm stocks up to 2.36 million tonnes in September and forecast that prices would trade between 1,900 and 2,200 ringgit this month.

In rival vegetable oil markets, the U.S. soyoil contract for December rose 0.5 percent in late Asian trade, while the most active January soybean oil contract on the Dalian Commodities Exchange shed 0.3 percent.

Investors were jittery ahead of a crop report by the U.S. Department of Agriculture, which is expected to raise forecasts for soybean production in the world's top exporter.

In other markets, Brent crude fell to a 17-month low below $98 a barrel on Thursday, down for the sixth straight session as worries over ample supply and weak demand outweighed concerns that conflict in the Middle East could curb oil production.

Palm, soy and crude oil prices at 1013 GMT

Contract        Month    Last   Change     Low    High  Volume
MY PALM OIL      SEP4    2075   +26.00    2060    2075      36
MY PALM OIL      OCT4    2086   +42.00    2016    2086    2106
MY PALM OIL      NOV4    2072   +39.00    2007    2073   18631
CHINA PALM OLEIN JAN5    5160   +22.00    5128    5178  505750
CHINA SOYOIL     JAN5    5884   -20.00    5856    5920  458960
CBOT SOY OIL     DEC4   31.98    +0.15   31.65   32.02    7103
INDIA SOYOIL     SEP4  613.25    +1.80  609.50  613.80    6825
NYMEX CRUDE      OCT4   91.10    -0.57   90.92   91.91   23099

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

($1 = 3.192 Malaysian ringgit)
($1 = 6.130 Chinese yuan)
($1 = 60.76 Indian rupees)