Malaysian crude palm oil futures soared 6.1 percent on Friday, clawing back heavy losses earlier in the week, as strength in crude oil markets boosted global vegetable oil prices, traders said. Chicago soyoil gained 1.2 percent in Asian trade while Dalian soyoil for January 2009 delivery jumped 2.4 percent following oil's $1-plus leap ahead of Tropical Storm Gustav in the United States.
Palm oil has dropped about 14 percent this year as high stocks and news of defaults from key buyers India and China has kept traders on tenterhooks. The benchmark November contract settled up 150 ringgit to 2,620 ringgit ($772) per tonne.
"Traders are short-covering ahead of the long weekend. The feeling is that crude oil will surge in the next few days and bring all the other vegetable oil markets with it," said a leading trader. Malaysian financial markets will be closed on Monday to mark Independence day, which falls over the weekend.
Other traded months rose between 65 and 135 ringgit. Overall volume stood at 12,797 lots of 25 tonnes each. But other traders said the market may fall further next week as demand shows some signs of cooling off amid forecasts that the high palm oil production cycle will continue way into November.
Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance will unveil palm export estimates for August on Tuesday. Leading industry analyst Dorab Mistry said early this week crude palm oil futures could slide as far as 2,200 ringgit per tonne before triggering fresh demand, as ideal weather extends the main growing season. In the physical market in Malaysia, crude palm oil for delivery in August and September were offered at 2,590/2,610 ringgit a tonne in the southern region. Trades were done between 2,550 and 2,600 ringgit.
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