Vegoils Weak ringgit lifts palm to 2-wk high, but sluggish exports weigh

by **Cals** Tue 21 Jan 2014, 00:09

Vegoils Weak ringgit lifts palm to 2-wk high, but sluggish exports weigh

Business & Markets 2014

Written by Reuters

Monday, 20 January 2014 18:50

KUALA LUMPUR (Jan 20): Malaysian palm oil futures rose to their highest in two weeks on Monday as a weaker ringgit prompted buying interest from overseas investors, but sluggish exports put a lid on gains and kept prices in a tight range.

The Malaysian ringgit fell 0.5 percent on Monday, hitting its lowest point in more than four months to trade at 3.3145 against the U.S. dollar. A weaker ringgit boosts margins for overseas buyers and refiners.

Weak demand for the tropical oil, however, weighed on prices. Cargo surveyor Intertek Testing Services reported that exports of Malaysian palm oil products in Jan. 1-20 fell 15 percent compared to a month ago as India, the world's biggest palm oil consumer, cut back purchases.

Another cargo surveyor, Societe Generale de Surveillance, showed exports fell 15.5 percent to 743,487 tonnes for the same period.

"Only a significant reduction in January and February production could stimulate export demand for palm oil, and funds have plenty of shorts to cover after selling crude palm oil futures aggressively since early January," said a trader with a local commodities brokerage in Malaysia.

The benchmark April contract on the Bursa Malaysia Derivatives Exchange had risen 1.6 percent to 2,580 ringgit ($779) per tonne by Monday's close. Prices had hit 2,585 ringgit in late trade, their highest since Jan. 7.

Total traded volume stood at 38,720 lots of 25 tonnes, slightly higher than the usual 35,000 lots.

Technicals showed Malaysian palm oil is expected to test a resistance at 2,564 ringgit per tonne, a break above which will lead to a further gain to 2,588 ringgit, Reuters market analyst Wang Tao said.

Stronger China soy markets helped support palm. Palm typically tracks soyoil as both vegetable oils are commonly used as substitutes for each other.

The most active May soybean oil contract on the Dalian Commodities Exchange rose 1.4 percent in late Asian trade.

Traders said weak palm prices last week have attracted bargain hunters looking for cheap deals. Prices plunged to a two-month low on Jan. 13 on fears that rising stockpiles in the world's second-largest producer would overwhelm demand.

"Futures found a lifeline from bargain hunting, weaker ringgit, and short-covering circa 2,485-2,490 ringgit last week," the trader added.

In other markets, Brent crude edged lower towards $106 per barrel on Monday, weighed down by data which showed China's oil consumption slowed in 2013 and as Iran started implementing a nuclear deal with world powers.

U.S. markets are closed on Monday.

Palm, soy and crude oil prices at 1009 GMT

Contract        Month    Last   Change     Low    High Volume
MY PALM OIL      FEB4    2562   +47.00    2537    2562     746
MY PALM OIL      MAR4    2568   +43.00    2548    2572    6551
MY PALM OIL      APR4    2580   +40.00    2559    2585   14042
CHINA PALM OLEIN MAY4    5922 +104.00    5764    5936 750760
CHINA SOYOIL     MAY4    6702   +90.00    6554    6716 805810
CBOT SOY OIL     MAR4   37.74    +0.00    0.00    0.00       0
NYMEX CRUDE      FEB4   93.66    -0.71   93.56   94.16    1659

Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in U.S. cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
Crude in U.S. dollars per barrel
($1=3.31 Malaysian ringgit)