Malaysian crude palm oil edged up on Friday in thin trades, lifted by optimism over the US Federal Reserve's pledge to keep interest rates low although gains were capped by fears of slowing demand. The Fed move raised prospects of stronger global economic growth and commodity demand, but investors remained cautious on signs that demand is slowing for No 2 producer Malaysia.
Cargo surveyors' reports suggested a double-digit decline in Malaysian palm oil exports from January 1 to 25, which some traders attributed to a shift in orders to Indonesia, which is imposing lower export taxes. "The market is expected to be range bound," said a dealer with a foreign commodities brokerage in Malaysia, pointing to a relatively quiet market as most traders were still on holiday for the Lunar New Year.
Benchmark April palm oil futures on the Bursa Malaysia Derivatives Exchange inched up 0.1 percent to close at 3,135 ringgit ($1,031) per tonne. The futures have lost 1.4 percent so far this year. Traded volumes were thin at 16,381 lots of 25 tonnes each, compared to the usual 25,000 lots. Reuters technical analyst Wang Tao maintained a bearish view, saying that a price target for palm oil is unchanged at 3,103 ringgit per tonne. The Malaysian weather office issued heavy rain warning for Sabah, a key oil palm producing state that accounts for 30 percent of the country's output.
On the demand side, Malaysian palm oil exports for the first 25 days of the month dropped 17 and 20 percent, said cargo surveyors Intertek Testing Services and Societe Generale de Surveillance. "The pace of export was very much slower compared to the first 20 days," said the Malaysian-based dealer. Top importers including China, India and European Union cut back orders, export data show The US soyoil contract for March delivery slipped 0.3 percent in Asian trade after an earlier rally. China's commodity markets are closed for Lunar New Year this week.