Malaysian palm futures ended slightly higher on Wednesday, recovering from a drop of nearly 6 percent at one stage, thanks to last-minute speculative buying, traders said. The market came under heavy selling pressure in the afternoon session as investors began to lock in profits, as the price had rallied for seven consecutive trading days, traders said.
The benchmark March palm oil contract on the Bursa Malaysia's Derivatives Exchange closed up 5 ringgit, or 0.25 percent, at 1,985 ringgit ($567) per tonne, coming off an intra-day high of 2,058 ringgit and a low of 1,868 ringgit. Other traded contracts were mostly lower, falling by between 18 and 102 ringgit. Overall volume was 25,653 lots of 25 tonnes each.
"The market has been massively overbought after the recent extended rally," a trader at a Malaysian brokerage said. Some traders had warned that the upward move had outrun fundamental support as Malaysian palm oil stocks may remain high despite of strong exports. With strong exports, Malaysia's crude palm oil inventories could decline from the record 2.27 million tonnes set in November 2008, possibly to 2 million tonnes in December, Goldman Sachs analyst Patrick Tiah said in a research note.
"However, this is still a high level of inventory by historical standards, and does not support a continued rally in CPO prices in the near term, in our view," Tiah said. The market, however, still got support at the last minute from speculators. One Malaysian trader suggested speculators might have gone short in the afternoon after the market has fallen quite fast, and therefore "had no choice but to cover their positions at the last minute."
INDONESIAN PALM TRADE In Indonesia, the world's largest palm oil producer, the state marketing centre said it failed to sell palm oil for the second day in a row due to low bids. Producers in Medan - home to Belawan port, Indonesia's key port for palm oil exports - did not hold a palm oil auction on Wednesday. They sold palm oil at 6,387-6,425 rupiah ($0.59-60) per kg on Tuesday.
Meanwhile, refiners in Jakarta sold refined, bleached, deodorised (RBD) palm oil, used as cooking oil, at about 7,000 rupiah per kg, up from 6,800 rupiah per kg on Tuesday. In the physical market, Malaysian palm oil for January deliveries were traded at 1,950-2,000 ringgit per tonne in the southern and central region.