Palm oil futures reversed earlier losses to close almost 2 percent higher on Wednesday, as bargain hunters entered the market and comparative oils helped ofset persistent doubts over the eurozone debt crisis. Benchmark February palm oil futures on the Bursa Malaysia Derivatives Exchange ended 1.7 percent higher at 3,051 Malaysian ringgit ($960) per tonne.
Traded volumes for the February palm contract were at 13,556 lots of 25 tonnes each, compared with 9,957 lots on Tuesday. "There are quite a lot of buyers below the 3,000 level," said a Kuala Lumpur-based trader. "We saw a lot of physical buying coming in." Palm prices have come under pressure this week after inventory data from top producer Malaysia came in above market expectations.
"Palm oil stocks topped expectations in November, which may cap the near-term upside for CPO price," Ivy Ng Lee Fang, an analyst at CIMB, said in a note. "Weaker exports and lower domestic usage were behind the higher stockpile." Traders found additional support from a possible impact on output due to the rainy season in top Southeast Asian producing countries.
Earlier this week, the state weather agency of number one palm producer Indonesia warned of floods in top producing regions Kalimantan and Sumatra. "Malaysia has been raining quite heavily," the trader added. "We are looking at floods nearly every day." Exports of Indonesian palm oil for November rose 42.5 percent, according to Reuters calculations based on data from an industry source.