Malaysian palm oil futures edged up on Thursday, as investors expect a marginal drop in January stocks, although cautious sentiment ahead of the upcoming long holiday capped gains. Lower production is likely to have helped Malaysian palm oil stocks ease in January from a record high in the previous month, a Reuters survey of five plantation companies showed on Thursday.
Inventory levels most likely dropped 2.9 percent to 2.55 million tonnes in January from December's all-time high, the first decline since last June, according to the survey. Stronger export demand seen in the last week of January may have helped cut stocks and the trend could persist, given palm oil's attractive discount to soybean oil and as worries eased over China's stricter quality regulation.
"Stocks are expected to drop, due to exports picking up towards end-January," said a dealer with a foreign commodities brokerage in Malaysia. At the close, the benchmark April contract on the Bursa Malaysia Derivatives Exchange had gained 0.2 percent to 2,552 ringgit ($826) per tonne. Prices were rangebound between 2,530 and 2,567 ringgit. Total traded volumes stood at 30,443 lots of 25 tonnes each, higher than the average 25,000 tonnes.
Technical analysis shows palm oil is expected to fall to 2,510 ringgit per tonne, as indicated by its wave pattern and a Fibonacci retracement analysis, said Reuters market analyst Wang Tao. The Malaysian financial markets will be closed next Monday and Tuesday for the Lunar New Year holiday. Industry regulator the Malaysian Palm Oil Board will release January inventory and output data after the market resumes trading on Wednesday. Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance will issue export data for Feb. 1-10 also on Wednesday.
The market will be looking for trading direction from Friday's US Department of Agriculture monthly supply and demand reports, which may be bullish for palm oil due to tighter soybean stocks. In competing vegetable oil markets, US soyaoil for March delivery eased 0.5 percent in late Asian trade. The most active September soyabean oil contract on the Dalian Commodity Exchange hit a one-week low.
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