Malaysian crude palm oil futures climbed to a near two-month high on Friday on hopes that Greece will soon secure a bailout package, while dry weather fears in soy-producing South America also provided support. The market optimism came back when a proposal to withhold part of the bailout until after Greek elections expected in April was dropped, increasing prospects of securing a deal next week and preventing the euro debt crisis from spreading.
Concerns of a smaller soybean crop in drought-hit Brazil and Argentina also lifted palm oil, which competes with soyoil for uses in biofuel and food. The palm oil futures market is up more than 2 percent this year, the highest gain posted so far. "Positive points to support palm oil come from the dryness in Argentina and Brazil. Also the winter season seems to be colder than usual in Europe, so that will be supportive for rapeseed oil," said Alan Lim, research analyst with Malaysia's Kenanga Investment Bank.
"But there are still lingering concerns on Europe and whether demand will be able to sustain," the analyst added. Benchmark May palm oil futures on the Bursa Malaysia Derivatives Exchange gained 1.7 percent to close at 3,242 ringgit ($1,066) per tonne. Prices earlier hit a high of 3,255 ringgit, a level last seen on November 21, due in part of an improvement in the technical outlook. Traded volumes stood at 30,764 lots of 25 tonnes each, the highest this week. On the technicals side, Reuters analyst Wang Tao said a bearish target at 2,900 ringgit per tonne has been revised to 3,487 ringgit per tonne for Malaysian palm oil over the next four weeks.
In signs of slowing demand, cargo surveyor Intertek Testing Services said Malaysian palm oil exports from February 1 to 15 fell 14 percent to 509,107 tonnes from a month ago. The US soyoil contract for March delivery edged up 0.7 percent while the most active September 2012 soyoil contract on China's Dalian Commodity exchange rose 1.1 percent.