Malaysian palm oil futures rose to a five-week high on Thursday, as a eurozone debt deal boosted investor sentiment, with higher crude prices and lower output expectations offering additional support. Benchmark January palm oil futures on the Bursa Malaysia Derivatives Exchange closed 1 percent higher at 2,980 Malaysian ringgit ($952) a tonne, after having earlier touched 3,007, a high not seen since September 22.
Traded volumes for the January palm contract stood at 13,281 lots of 25 tonnes each, compared with 14,264 lots on Tuesday, before Wednesday's holiday in Malaysia for the Hindu Diwali festival of lights. "The monsoon weather (season) is in play, and a supportive external market and higher crude oil," said a Kuala Lumpur-based trader. "Generally markets are firmer - from stock markets to commodities," said a Jakarta-based palm trader. "The market has priced in European factors ... with funds trying to go into commodities again (and) Malaysia demand not too bad."
Reuters technical analyst Wang Tao said a bullish target at 3,014 ringgit was intact for palm oil, and a rise above this level would open the way towards 3,133 ringgit. Crude oil prices rose more than $2 on Thursday on the European deal. Also aiding palm oil sentiment on Thursday were lower production expectations due to the rainy season in dominant Southeast Asian producers. A weaker version of La Nina may reappear this year, but still triggering above-normal rainfall in Southeast Asia and eastern Australia.
"Going into the last quarter of the year, prices have a lot of room to move up," said a Singapore-based analyst. "This is on the back of slowing CPO production growth ... everyone is also looking to the South American (soybean) harvest." "The eurozone is a driver of positive sentiment in the commodities scene but there will still be a lot of volatility," he said on sovereign debt problems, adding that palm prices could now rise 10 percent by the first quarter of 2012.
At the same time, demand looks robust, with data earlier this week showing Malaysian exports rose around 15 percent for October 1-25. US soyoil for December delivery gained about 2 percent in Asian trade, while China's most active May 2012 soybean oil contract also rose.
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