Malaysian crude palm oil futures ended higher on Tuesday in late short covering ahead of the long holiday closures marking the Lunar New Year.
Dealers cited no particular news driving the market up. "It's just that people are worried anything can happen in the Chicago market during the holidays," said one.
The market will close from January 21 to 23 for Lunar New Year, and reopen on January 26. Trading got off to a slow start amid new margin requirements and news of smaller-than-expected rise in January 1-20 exports.
The benchmark third-month contract, April, eventually ended the day 14 ringgit up at 1,740 ringgit ($457.89) a tonne, well above its intraday low of 1,706.
Other traded months were five to 19 ringgits up. Overall volume was 1,801 lots.
Both cargo surveyors SGS and ITS put January 1-20 exports at 605,618 and 604,194 tonnes respectively, well below traders' expectations of 620,000-630,000 tonnes.
Higher margin requirements were also a dampener. Traders said the Malaysia Derivatives Exchange had asked an additional margin, or cash deposit, of 750 ringgit for each lot from Tuesday, 23 percent more than the current 3,250 ringgit a lot it charges to trade palm oil futures.
Margin increases usually act to force less-capitalised players to liquidate their holdings.
Exchange officials were unavailable for comment, but traders said the move was normal before a long holiday in order to curb volatility when the market reopens.
Private crop forecaster Ivan Wong's crop report for January came with no surprises.
Physical crude palm oil for January saw bids/offers at 1,780/1,785 ringgit a tonne in the southern region.
February was quoted at 1,780/1,790. Trades were reported at 1,780 and 1,785 ringgit for January shipment and 1,780 for February. In the central region, January/February CPO saw bids/offers at 1,785/1,790 and trades at 1,780 and 1,785.
PALM OIL FUTURES:
January (south): 1790.
Open/High/Low: 1706/1745/1706.
Previous closes: 1780.
PALM OIL PHYSICALS: April (3rd month): 1740.
Previous settlement: 1726.
FUTURES: Benchmark April up 14 ringgit in late covering ahead of long Lunar New Year holidays. Export estimates below expectations.
PHYSICALS: Edge up in line with futures.
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