Malaysian palm oil futures hit a six-week high on Wednesday, supported by short-covering and technical buying ahead of production data due later this week. By the close, the benchmark November contract on the Bursa Malaysia Derivatives exchange ended 1.1 percent higher at 2,114 ringgit ($489) a tonne. Earlier palm rose to 2,132 ringgit, its strongest level since July 29, and prices have now gained 6 percent this month.
Traded volume stood at 49,876 lots of 25 tonnes each, above the average 35,000 lots. "The market is up and breaking new highs," said a trader based in Kuala Lumpur. "There is a lot of speculative buying and short-covering going on but it's more technical." The Malaysian Palm Oil Board is set to release production and stocks data for August on Thursday, he said, adding that many traders are expecting the outlook to be bearish.
Palm oil is expected to test resistance at 2,113 ringgit per tonne, a break above which could lead to a further gain to 2,171 ringgit, said Reuters market analyst for commodities and energy technicals Wang Tao. "Prices are in short-covering mode," said a second palm trader, citing market talk that a weekly US government report may lower its crop rating.
"The weaker ringgit and improved external markets are certainly the catalyst." In other vegetable oil markets, the most active January soybean oil contract on the Dalian Commodity Exchange was 0.8 percent higher, the US December soyoil contract was up 0.4 percent in late Asian trade. In other oils, stronger stock markets helped stabilise crude prices, yet concerns about oversupply persisted.
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