Malaysian palm oil futures rose on Monday, extending gains for a third session, as traders expect to see inventories dip below the 2 million tonne mark at the end of February. Traders said that palm also gained on a technical correction despite lower export data, following a five-day fall last week. Palm futures had lost 1.7 percent last week.
The palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange was up 0.2 percent at 2,548 ringgit ($606.67) per tonne at the close. Traded volume stood at 31,134 lots of 25 tonnes each. "Traders are estimating end-stocks to dip below two million tonnes in the next MPOB report," said a trader from a brokerage firm in Kuala Lumpur, referring to February data from government body the Malaysian Palm Oil Board (MPOB).
"This is keeping the market cautious albeit worsening exports. We also have the weak ringgit to support prices." Palm was supported by a weakening ringgit in early trade on Monday. Malaysia's ringgit, the currency palm oil is traded in, rebounded in the evening to strenghten 0.2 percent to reach 4.2000 against the dollar. A weaker ringgit makes palm oil cheaper for holders of foreign currencies.
Malaysia's inventories are seen falling in line with the seasonal trend and due to the dry weather effects of the El Nino which lowers palm's fresh fruit yields. January stockpiles stood at 2.3 million tonnes, down from an all time high of 2.9 million tonnes recorded in November last year. Export data from cargo surveyors Intertek Testing Services and Societe Generale de Surveillance showed that palm oil shipments fell 17-18 percent for the full month of February from a month ago. Malaysian palm oil shipments have been falling in recent weeks as demand for the tropical oil from top consumers China, India and Europe wane.
Palm oil is expected to test resistance at 2,576 ringgit per tonne, with a good chance of breaking above this level and rising further into a range of 2,597-2,618 ringgit, said Wang Tao, a Reuters market analyst for commodities and energy technicals. In competing vegetable oil markets, the May soybean oil contract on the Dalian Commodity Exchange gained 0.4 percent, while the Chicago soyoil contract fell slightly by 0.03 percent.