Malaysian palm oil futures climbed on Tuesday as traders bet strong exports would rein in stocks below 2 million tonnes this month, although financial market volatility kept some investors cautious. Palm oil has been weighed by high stocks in Malaysia and Indonesia and most recently, wobbly financial markets and concerns of weaker global economic growth after the US credit rating got downgraded this month.
"Trading is a tad lighter today thanks to investor caution. With exports continuing their strong performance, stocks are going to come down this month given that production will dip thanks to the holiday season," said a trader with a foreign commodities brokerage. The benchmark November contract on the Bursa Malaysia Derivatives Exchange settled up 1 percent at 3,033 ringgit ($1,017.61) per tonne. The previous day prices touched 3,045 ringgit, to flirt near-two week highs.
Overall traded volumes were light, with 20,104 lots of 25 tonnes each changing hands compared to the usual 25,000 lots. Technicals were turning negative. Reuters analyst Wang Tao said a bullish target at 3,144 ringgit per tonne has been aborted for palm oil and a bearish target has been established at 2,917 ringgit.
But palm oil's demand-supply data points may turn more bullish. Malaysian palm oil exports for the first 15 days of August rose more than a fifth and traders expect the trend to continue. Production is likely to slip as estate workers take extended leave for the Muslim fasting observance of Ramazan that began earlier this month and will end with Eid celebrations in late-August.
Weaker equities put some pressure on commodity markets. US soyoil for September delivery was 0.2 percent higher in late Asian trade. China's most-active May 2012 soyoil contract edged up 0.3 percent. "Prices of agriculture commodities in China are likely to increase due to strong demand for soybean, soyoil and soymeal," said a trader with Shanghai-based foreign brokerage. "The stocks level of these products are healthy, resulting in a firm trend on agriculture commodities," he added.