Malaysian palm oil futures climbed to a one-week high on Friday, with sentiment driven by rising crude prices as the crisis in Libya and parts of the Middle East showed little sign of resolution. The benchmark May 2011 crude palm oil contract on Bursa Malaysia Derivatives added 1.7 percent to 3,660 Malaysian ringgit ($1,207) a tonne. Earlier, prices rose to a high of 3,665 ringgit, the highest since February 22.
"Palm oil is marginally higher," said one trader. "It is supported by steady crude oil. The revival of biodiesel is coming into play." "The problem with the Middle East is that there is a lot of pockets of protest and resistance right now - Libya is only one of many." Overall, traded volume stood at 11,410 lots of 25 tonnes each, compared with a one-week high of 16,012 lots on Thursday.
This week, benchmark palm oil prices climbed about 4 percent as investors eye growing demand for biodiesel after tension in the Middle East boosted crude oil. "Short-covering ahead of the weekend and the POC," said a dealer, referring to the annual Palm and Lauric Oils Conference & Exhibition Price Outlook 2011 in Kuala Lumpur next week.
Investors are also watching for developments in China, a top consumer of palm oil, used in products such as food, cosmetics, tyres and biofuels. China will cut tariffs and red tape to boost imports this year and "maintain balanced trade", Zhong Shan, the country's vice minister of commerce said in comments published on Thursday, but did not disclose details.
The most-active September 2011 soyoil on the Dalian Commodity Exchange traded at 10,438 yuan versus an open at 10,398 yuan. Beijing is acutely worried about rising food prices and the potential for civil unrest related to inflation. The annual National People's Congress opens on Saturday, which marks the launch of the next five-year plan.
Global palm oil production stands at about 45 million tonnes per year, with China buying around 7 million tonnes. India is also a major buyer. Analysts say these import figures are only likely to rise. Independent smallholder palm oil plantations in Indonesia could more than double production however, if given access to better farming techniques, an environmental group said on Thursday.
ICDX's May CPO futures contract was at 10,670 Indonesian rupiah ($1.212) per kg, compared to 10,495 rupiah per kg when it opened. Market volume was 1,543 lots of 10 tonnes each. Malaysia's February palm oil stocks probably dropped to 19-month lows as overall demand outpaced almost flat production, a Reuters survey showed.
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