Malaysian palm oil futures closed slightly lower on Wednesday, as last-minute selling on better-than-expected soybean yields in the United States offset gains boosted by expectations of strong export data. Sentiment remains cautious after palm oil futures lost as much as 5.3 percent on Tuesday on reports that the US Midwest soybean crop was not as badly damaged by drought as initially feared, and that the harvest was progressing fast.
Palm oil can be usedd as a substitute for soyaoil. Crude palm oil was likely to find an initial support at 2,840 ringgit a tonne, said Ker Chung Yang, an analyst with Phillip Futures, but prices were likely to fall further in tandem with soybeans. "We may see some short-covering which may extend for another day, but we need to understand that the weakness is likely to persist for crude palm oil," said Ker.
The benchmark December contract on the Bursa Malaysia Derivatives Exchange fell 0.1 percent to close at 2,859 ringgit ($935). On Tuesday, prices touched a low of 2,827 ringgit, a level last seen on August 15. Total traded volume stood at 44,696 lots of 25 tonnes each, much higher than the usual 25,000 tonnes.
Technicals showed Malaysian palm oil likely to retest a support level at 2,832 ringgit per tonne, driven by a downward wave capable of travelling to 2,719 ringgit per tonne, Reuters market analyst Wang Tao said. Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance will announce on Thursday palm oil exports for the first 25 days of the month, but the expected sales hike may not be enough to calm worries about rising inventories. Exports for the first half of September rose 12 percent from a month ago, cargo surveyor data showed on Tuesday. In other vegetable oil markets, US soyaoil for December delivery rose 0.4 percent. The most active January 2013 soyaoil contract on the Dalian Commodity Exchange closed 0.3 percent higher, recovering from previous day's near 1-month low.
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