Malaysian palm oil futures inched higher on Thursday, spurred by early gains in China's soy markets and investor optimism for stocks in the world's No 2 producer to shrink for a sixth straight month. But prices stayed in a tight range between 2,366 ringgit and 2,384 ringgit as investors avoided risky bets ahead of an official stocks report to be released next Wednesday by industry regulator the Malaysian Palm Oil Board (MPOB).
Palm oil inventories at the end of June are likely to have dropped to a year-low of 1.74 million tonnes, a Reuters poll showed, as demand continued to outstrip supply. "The market today is moving higher on the back of friendly Dalian soybean oil pricing. Palm has been down for some time, so it's adjusting," said a Kuala Lumpur-based trader with a foreign commodities brokerage.
The benchmark September contract on the Bursa Malaysia Derivatives Exchange gained 0.2 percent to close at 2,370 ringgit ($745) per tonne. Total traded volumes stood at 26,046 lots of 25 tonnes each, below the average 35,000 lots. Technicals showed palm oil was expected to test a strong resistance at 2,391 ringgit, only a break above which could lead to a further gain to 2,408 ringgit, Reuters market analyst Wang Tao said.
Despite stronger exports buoyed by demand for the Muslim festival month of Ramazan in July, palm has been weighed down by laggard economic conditions in top two buyers China and India, coupled with a bearish outlook on production. Prices fell 3.9 percent in the first half of 2013. Output of the tropical oil in June is seen rising 6 percent, the Reuters poll showed, suggesting the start of a higher production cycle that typically begins in the second half. In vegetable oil markets, the most-active January soybean oil contract on the Dalian Commodities Exchange rose 0.4 percent in the morning session, but was flat at close.
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