Malaysian palm oil futures rose to a more-than-three-week high on Thursday, lifted by hopes that demand might be picking up after a jump in exports, although caution over palm stocks that have swollen past 2 million tonnes kept a lid on gains. Shipments of Malaysian palm oil products surged about 40 percent in the first 10 days of September compared to the same period in August, cargo surveyors reported, after the No.2 producer said it would temporarily scrap export duties for the crude grade.
"The zero export tax move came in and changed sentiment to supportive," said a trader with a foreign commodities brokerage in Kuala Lumpur. "We anticipate exports of crude palm oil in September and October will be much better." The removal of export taxes for those two months could stoke demand for crude palm oil (CPO) from key buyers overseas and keep prices from slipping below the 2,000 ringgit mark, analysts said.
"We expect the news to have a positive impact on CPO prices as it should encourage demand from countries that may prefer CPO against refined palm oil, such as India and China," said Kenanga Investment Bank analyst Alan Lim. Market players said aggressive buying in the cash market also helped push up palm prices in late trade.
The benchmark November contract on the Bursa Malaysia Derivatives Exchange had inched up 1.9 percent to 2,072 ringgit ($649) per tonne by Thursday's close, after hitting a August 20 high of 2,073 ringgit. Total traded volume stood at 39,439 lots of 25 tonnes, above the average 35,000 lots. Technicals showed that palm oil was expected to retest resistance at 2,055 ringgit per tonne, a break above which would lead to a further gain towards 2,142 ringgit, said Reuters market analyst Wang Tao.
While the rebound in exports supported prices, which have slid 22 percent in 2014, a surprise surge in palm oil stocks curbed gains. Industry data showed Malaysian palm oil stocks surpassed market estimates and climbed to 2.05 million tonnes at the end of August, the highest in more than a year, after favourable weather boosted production of the tropical oil. "The higher-than-expected palm oil inventory is negative for CPO prices as it suggests there is ample supply of edible oils in the near term, which may cause certain buyers to defer their purchases," said CIMB analyst Ivy Ng.