Palm trades northward as industry body estimates larger output drop

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KUALA LUMPUR (Feb 7): Malaysian palm oil futures climbed on Tuesday, securing a second consecutive session of gains as the market remained buoyant on expectations of tighter supplies.

Benchmark palm oil futures for April delivery on the Bursa Malaysia Derivatives Exchange were up 0.46% at RM3,082 (US$695.08) per tonne. Traded volumes stood at 54,884 lots of 25 tonnes each.

A Kuala Lumpur-based trader pointed out that estimates from the Malaysian Palm Oil Association (MPOA) released on Tuesday suggested a wider fall in palm output than the market expected.

"MPOA update for the January production suggested 13% fall, (bigger) compared with market poll of 9% to 10% drop. This could lead to more drawdown in stocks," she said.

However, the decline in crude oil prices limited the upside in palm, the trader added. Benchmark Brent crude was 0.22% lower at US$55.60 on Tuesday evening.

Another trader said market sentiment has been supported by expectations of subdued production. Traders are looking forward to low stocks figures from the Malaysian Palm Oil Board (MPOB) at the end of this week.

"Market is expecting lower production, going down by at least 10%, ahead of the MPOB report," he said.

Earlier in the day, a dip on the Dalian Commodities Exchange led to some profit booking, although the weaker ringgit helped offset the sell-off, the trader said. The ringgit fell 0.16% to 4.4340 to the US dollar.

Weakness in the ringgit, which palm is traded in, makes the tropical oil more attractive to traders holding foreign currencies.

The May contract for Dalian soybean oil slipped 0.38%, while the palm olein contract fell 0.33%.   

Signals are mixed for palm, as the contract approaches a resistance at RM3,089 per tonne again, according to Reuters market analyst for commodities and energy technicals, Wang Tao.

"A break above the resistance could lead to a gain to RM3,169. Even though palm oil has briefly pierced above RM3,089, a valid break could possibly be confirmed when it stands firm above this level," he said.    

On the Chicago Board Of Trade, the March soybean oil contract gained 0.12%.   

Palm, soy and crude oil prices at 1035 GMT

Contract                     Month      Last    Change         Low       High       Volume
MY PALM OIL   FEB7          3275    +13.00        3265       3286          192
MY PALM OIL  MAR7          3168    +16.00        3144       3176         3387
MY PALM OIL   APR7          3078    +10.00        3057       3094        25147
CHINA PALM OLEIN    MAY7          6124    -20.00        6098       6188       378312
CHINA SOYOIL    MAY7          6844    -26.00        6830       6906       271606
CBOT SOY OIL    MAR7         34.48     +0.00       34.37      34.64         5473
INDIA PALM OIL   FEB7        578.50     +0.00      577.50        580          579
INDIA SOYOIL   FEB7        702.85     +0.35       702.7      705.5         5550
NYMEX CRUDE      MAR7         52.87     -0.14       52.70      53.24        73707

(US$1 = RM4.4340)
(US$1 = 67.35 Indian rupees)
(US$1 = 6.8750 Chinese yuan)