Malaysian palm oil futures rose on Friday after the US Federal Reserve kicked off a third round of quantitative easing to stimulate its economy and as investors took up positions ahead of a long weekend. "The market is up on the back of yesterday's QE3 announcement. The market has also been oversold for quite some time and is now recovering a bit," said a trader with a foreign commodities brokerage.
The benchmark November contract on the Bursa Malaysia Derivatives Exchange ended up 0.8 percent to 2,936 ringgit ($966.1) per tonne after going as high as 2,945 ringgit. Total traded volume stood at 33,029 lots of 25 tonnes each, up from the usual 25,000 tonnes as trades locked in positions ahead of long weekend holiday.
Technicals showed Malaysian palm oil will retest a resistance at 2,960 ringgit per tonne as a rebound from the September 11 low of 2,874 ringgit has not completed, said Reuters market analyst Wang Tao. The widening discount between edible soyaoil and palm oil has helped shift demand to the cheaper tropical oil, but investors remain cautious due to rising inventory levels in the No 2 producer.
"Everybody knows that stock is still plentiful and I won't be surprised if September stocks go higher. That's why market is a bit depressed although the spread between bean oil and palm oil is more than $300 per tonne," the trader said. In other vegetable oil markets, US soyaoil for December delivery climbed nearly 1 percent, buoyed by the US Federal Reserve's announcement which investors hope will improve the demand outlook for raw materials. The most active January 2013 soyaoil contract on the Dalian Commodity Exchange climbed 1.2 percent.