Malaysian palm futures closed nearly 2 percent higher on Monday on hopes that demand will rise ahead of the Chinese New Year festival early next year, traders said. Palm oil sustained its gains in late trade, shrugging off a weaker turn in crude oil, as traders focused on hopes for improvements in market fundamentals, they said.
There was also speculation that Malaysian palm oil exports figures for November 1-25 due out on Tuesday will show an increase from the same period of the preceding month. The benchmark February palm oil contract on the Bursa Malaysia's Derivatives Exchange closed 28 ringgit, or 1.92 percent higher, at 1,488 ringgit ($410) per tonne. Other traded contracts rose between 11 ringgit and 39 ringgit. The overall volume stood at 11,717 lots of 25 tonnes each.
US light crude for January delivery was down 29 cents to $49.64 by 1038 GMT in Asian trading, coming off an earlier high of $51.34. "I think China will ultimately have to come. They will require palm oil," an analyst at a Kuala-Lumpur based brokerage firm said.
The analyst said the supply and demand situation should now favour palm oil. Stronger exports coupled with falling production in the next two to three months should reduce the stock levels. The analyst said he shared Goldman Sachs' view that palm prices were near bottom after losing about two thirds from a record high. Edible oil demand has remained relatively resilient even during severe recessions, Patrick Tiah, an analyst at Goldman Sachs, said in a reserach note, citing a brokerage study.
"Our study of prior CPO cycles indicates that prices tend to be supply driven, and we expect CPO supply to start slowing due to yield stress and replanting activities, while soybean production may also disappoint due to low prices and tight credit," Tiah said.
INDONESIA PALM TRADES: In Indonesia, the world's biggest palm oil producer, the state marketing centre said it had sold 7,500 tonnes of crude palm oil out of 11,500 tonnes it offered, at a top price of 5,329 rupiah ($0.442), up from 5,160 rupiah on Friday. Producers in Medan - home to Belawan port, Indonesia's key port for palm oil exports - did not hold an auction on Monday.
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