Malaysian benchmark palm oil futures rose on Tuesday, overcoming a stronger ringgit , as demand for the tropical oil ahead of Ramazan pushed up prices. Demand for palm oil usually comes in one to two months before Ramazan, which begins in early June this year. The Ramazan is a month of fasting, which sees higher demand for palm oil used in cooking, leading up to Eidul Fitr. The new palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange was 0.5 percent higher at 2,600 ringgit ($647) per tonne in the evening.
Traded volumes stood at 49,902 lots of 25 tonnes each at closing trade, above the 2015 daily average of 44,600. "Although the ringgit is stronger today, the market is covering for May and June as Ramazan demand is there," said a Kuala Lumpur-based trader. The Malaysian ringgit rose as crude oil futures held near six-week highs, easing concerns over the country's falling gas and oil revenues. A stronger ringgit, the currency in which palm oil is traded, typically makes it more expensive to buy for foreign currency holders.
"Everyone wants to rush the shipments before Eid. The half a percent rise (in crude palm oil export tax) won't make much of an impact, it's very marginal," the trader said. Malaysia its raised export tax on crude palm oil to 5.5 percent for June, a government circular showed on Tuesday. The world's second largest palm oil producer set the export tax at 5 percent for April and May.
Palm oil shipments rose 14-16 percent in the first half of May compared with the same time period a month ago, according to data from cargo surveyors, lifted by rising demand from Europe, Pakistan and India. Palm oil is expected to rise to 2,631 ringgit per tonne now it has cleared resistance at 2,605 ringgit, according to a technical analysis by Wang Tao, a Reuters market analyst for commodities and energy technicals.
In competing vegetable oils, the September soybean oil contract on the Dalian Commodity Exchange rose 1 percent, while the Chicago Board of Trade soyoil contract for August was up 0.3 percent. The offer price for crude palm kernel oil stood at 4,877.71 ringgit a tonne in the evening, according to price assessments by Thomson Reuters.