KUALA LUMPUR: Malaysian crude palm oil futures were almost flat after hitting a one-month high earlier on Thursday, with traders turning a little cautious as the worst drought in the US Midwest in 56 years pushes oilseed prices higher.
Palm oil futures have been riding on the back of weather-fuelled gains in the soybean oil market after a long weekend holiday and strong export demand, although traders said the price rally might not be sustainable.
"The market looks a little toppish. The current high prices will certainly hurt demand," said a trader with a local commodities brokerage in Malaysia. "We are also entering the peak palm oil production months of September and October, which could cap any major rallies."
By the midday break, the benchmark November 2012 contract on the Bursa Malaysia Derivatives Exchange were almost unchanged at 3,079 ringgit ($994) per tonne. Prices earlier hit a high of 3,100 ringgit, a level last seen on July 17.
Total traded volumes stood at 10,242 lots of 25 tonnes each, lower than the usual 12,500 lots.
Technicals appears to be supportive. Palm oil will soar to 3,183 ringgit per tonne as it has broken above a resistance at 3,044 ringgit, said Reuters market analyst Wang Tao.
Demand for the edible oil was resilient with Malaysia's palm oil exports rising 6 percent for the Aug 1-20 period from a month ago on higher shipments to China and India, cargo surveyor Intertek Testing Services said on Wednesday.
Another cargo surveyor Societe Generale de Surveillance will release Aug 1-20 data together with Aug 1-25 data on Monday.
The worst drought in the US in over half a century that damaged soybean crop prospects remained in focus as a smaller supply of soybean oil could shift more demand to the cheaper palm oil.
Planters are also concerned by weather woes closer to Southeast Asia, where a possible return of El Nino by end of the year could hurt oil palm yields for major producers Indonesia and Malaysia.
Brent crude rose on Thursday, approaching $116 per barrel on renewed hopes for another round of monetary stimulus by the US Federal Reserve, helping investors look past weak manufacturing data from China.
In other vegetable oil markets, the most active US soyoil contract for December delivery lost 0.3 percent by 0433 GMT. The most active January 2013 soyoil contract on the Dalian Commodity Exchange was 0.3 percent higher by the midday break.
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