Malaysian palm oil futures eased for the first time in five days on Thursday as investors banked profits after prices hit a three-week high, although optimism of improving food and fuel demand kept stemmed losses. The benchmark July contract on the Bursa Malaysia Derivatives Exchange touched 2,700 ringgit in early Thursday trade, but then fell to 2,648 ringgit ($817) per tonne by the day's close, down 1.3 percent.
"The market open higher but then went down on profit-taking, and it's facing some resistance around the 2,700 ringgit level," said a trader with a foreign commodities brokerage. Total traded volume stood at 40,587 lots of 25 tonnes, above the average 35,000 lots.
Third-month prices surged to an intraday high of 2,691 ringgit on Wednesday, its highest since March 27, as better-than-expected economic data from China soothed fears about slowing demand from the world's No 2 consumer of the tropical oil. Technicals showed that Malaysian palm oil faces a resistance at 2,703 ringgit per tonne and may retrace to 2,653 ringgit before retesting this barrier, said Reuters market analyst Wang Tao.
Market players anticipate palm oil demand to pick up as buyers restock ahead of Ramazan at end-June, and Eidul-Fitr celebrations in July. Festivals typically drive up consumption of the tropical oil used as cooking as oil, and also as an ingredient in food ranging from cookies to chocolate.
A possible return of the crop-damaging El Nino weather phenomenon also raised fears of a supply squeeze from the world's top palm producers Indonesia and Malaysia, which analysts say could bolster prices above 3,000 ringgit. The UN World Meteorological Organisation said on Tuesday that a majority of weather forecasting models indicate that an El Nino may develop around the middle of the year, but it is too early to assess its likely strength. In competing vegetable oil markets, the US soyoil contract for May slipped 0.5 percent in late Asian trade, while the most active September soybean oil contract on the Dalian Commodities Exchange rose 1.1 percent.