Malaysian crude palm oil futures rose 1.8 percent on Wednesday, snapping a four-day losing streak as resurgent crude oil prices brightened global vegetable oil markets. But gains were tempered by fears of a supply build-up and expectations of slow demand despite palm oil prices now trading 22 percent below record highs hit in March, dealers said.
The benchmark September contract on the Bursa Malaysia Derivatives Exchange settled up 61 ringgit at 3,515 ringgit ($1,084) per tonne. "External factors such as crude oil and even soyoil have given the upside to palm oil but domestic fundamentals like higher stock levels and weak exports have the potential to drag the market lower," said a trader with a foreign brokerage.
Other traded months rose between 8 and 75 ringgit. Overall traded volumes rose to 12,835 lots of 25 tonnes from the usual 10,000 lots. But some traders said news of Indonesia aiming to make mandatory the use of a 2.5 percent blend of biodiesel by September this year was supportive for the market.
"This may eventually lead to a tightening of global palm oil stocks and Malaysian palm futures market will benefit from this," said another trader. The Indonesian government is drafting two ministerial decrees which will make the use of palm biodiesel blend mandatory for both the industrial and transport sectors, the chairman of the National Biodiesel Development Team said on Wednesday.
Malaysia's June palm oil stocks likely surged 9.8 percent to 2.10 million tonnes, the highest in at least 25 years, as the production cycle shifted to a higher gear amid a slowdown in shipments, a Reuters poll showed on Wednesday.
Industry regulator Malaysian Palm Oil Board will unveil June's palm oil stocks, exports and production figures on Thursday. Cargo surveyors Societe Generale de Surveillance and Intertek Testing Services will report July 1-10 export numbers on the same day.
Other dealers said exports might start to recover in July as buyers in China, India and Middle East nations tend to stock up at least two months before the Asian festival season that begins in early September.
Crude oil prices rose $2 on Wednesday, partly recouping a $5 drop in the previous session, after Iran said it had test-fired missiles that could reach Israel and US bases in the region. Soyoil for July delivery at the Chicago Board of Trade followed on the back of crude oil, gaining 1.5 percent in Asian trade on Wednesday to halt steep losses made the previous day.
In Malaysia's physical market, crude palm oil for July shipment in the southern region was quoted at 3,510/3,520 ringgit a tonne. Trades were done between 3,500 and 3,515 ringgit.
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