Malaysian palm oil futures ended higher on Thursday, bouncing off a nine-month low hit in early trades, after an industry report showed that stocks in the No 2 producer sank to a one-year low, signalling tighter supplies ahead. The Malaysian Palm Oil Board reported that palm stocks fell a bigger-than-expected 10 percent to 1.66 million tonnes at end-June, their lowest since June 2013, as dry weather curbed yields of the tropical oil.
The drop in stocks, which was the first in four months, missed market estimates that had forecast inventories to fall to 1.80 million tonnes. "The end-stocks are very tight and the fundamentals for palm are very strong. Production is dipping - I don't see any improvement for July," said a trader with a local commodities brokerage in Malaysia, who expects July end-stocks to fall below 1.65 million tonnes. "It's about time the market recovers. With the current fundamentals, we should see better prices going forward."
The benchmark September contract on the Bursa Malaysia Derivatives Exchange edged up 0.6 percent to settle at 2,387 ringgit ($751) per tonne, recovering from a low of 2,349 ringgit - a level last touched on October 8. Total traded volume stood at 53,867 lots of 25 tonnes, above the usual 35,000 lots.
Technicals showed Malaysian palm is expected to fall to 2,340 ringgit per tonne, as it has broken below a support at 2,358 ringgit, said Reuters market analyst Wang Tao. An uptick in export demand provided some support to prices that have fallen 10 percent so far this year. Data from cargo surveyor Intertek Testing Services showed that exports of Malaysian palm oil products for July 1-10 rose 14.1 percent from the same period a month ago, thanks to stronger demand from the world's top edible oil consumers China and India. Another cargo surveyor showed exports for the same period rose 18.7 percent.
Palm oil, used as cooking oil and to make a range of foodstuffs from instant noodles to margarines, as well as an additive in biodiesel, typically tracks soyoil which is a common food and fuel substitute. The US soyoil contract rose 0.6 percent in late Asian trade, while the most active soybean oil contract on the Dalian Commodities Exchange shed 0.2 percent.