Malaysian crude palm oil futures rose to the highest in more than five weeks on Thursday, as investors anticipated a dry-weather rally would continue after US markets reopened from a holiday. Futures edged down slightly in the morning session as traders turned cautious ahead of the European Central Bank's policy decision due later in the day.
But prices picked up after the midday break as a persistent drought in the US Midwest that has damaged soybean crops, leading to a smaller supply of soybean oil, could mean higher demand for the tropical oil. "Traders are trying to take positions before the US markets reopen," said a Singapore-based trader with a foreign commodities house. Benchmark September palm oil futures on the Bursa Malaysia Derivatives Exchange rose 1.4 percent to close at 3,164 ringgit ($1,001) per tonne. Prices earlier touched a high of 3,177 ringgit, a level unseen since May 29.
Traded volumes stood at 34,937 lots of 25 tonnes each, much higher than the usual 25,000 lots, on increased hedging activities. "The market is a little overbought technically and we see some initial profit-taking. Fundamentally, end-stocks in Malaysia are tight while weather remains hot and dry in the US Midwest," said another trader with a local commodities brokerage in Malaysia."Demand is also good with the current discount between palm olein and soybean oil." Traders anticipate more vegetable oil demand shifting to cheaper palm oil on tighter global oilseed supply and buying ahead of Ramazan, beginning in the third week of July.
Malaysia's palm oil exports rose in June from a month ago, according to cargo surveyor data. Higher exports, together with weaker production growth, could pile further pressure on Malaysia's stocks, which fell to a 13-month low in May. Industry regulator Malaysian Palm Oil Board (MPOB) will issue official data on stocks and output for June on Tuesday. In other vegetable oils markets, the most active January 2013 soyoil contract on the Dalian commodity exchange edged up 0.1 percent, after touching a near two-month high on US weather concerns.
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