Vegoils Palm oil extends gains on output worries, short covering

by **Cals** Wed 27 Jan 2016, 05:44

Vegoils

[size=28]Palm oil extends gains on output worries, short covering

By Reuters / Reuters | January 26, 2016 : 7:25 PM MYT
KUALA LUMPUR (Jan 26): Malaysian palm oil futures rose for a second session and hit a one-week high on Tuesday, buoyed by expectations of lower output and as traders covered their short positions ahead of the Lunar New Year holidays, but gains were restricted as crude oil prices resumed their descent.
Benchmark palm oil prices have been under pressure and hit a one-week low earlier this month, in the absence of an expected pick up in demand from China, before the new year celebrations in February. A plunge in crude oil futures to 12-year lows has also made the tropical oil less attractive for blending into biofuel.
"Lower output in January and short covering are the catalysts behind firmer prices today," said a trader based in Kuala Lumpur. "As February is a short month with long Chinese New Year holidays, major selloffs will be muted temporarily."
The palm oil contract for April on the Bursa Malaysia Derivatives Exchange gained 0.6% to 2,475 ringgit (US$577.12) per tonne at the close of trade. It earlier reached 2,479 ringgit, its highest since Jan 18.
Traded volume stood at 44,679 lots of 25 tonnes each. The market will be closed on Feb 1 for a public holiday in Kuala Lumpur, and over Feb 8-9 for the Lunar New Year holidays.
Production from Malaysia, the world's No.2 palm oil producer after Indonesia, is expected to decline in the coming months, in line with seasonal trends and as the impact of a crop-damaging dry weather linked to an El Nino weather pattern kicks in.
Palm oil still targets a resistance at 2,495 ringgit per tonne, as suggested by its wave pattern and a Fibonacci projection analysis, according to Wang Tao, a Reuters market analyst for commodities and energy technicals.
However, weak exports will likely keep a lid on gains.
Data from cargo surveyors shows monthly exports of Malaysian palm oil products have dropped around 8% so far in January.
A slide in crude oil prices to below US$30 per barrel, after a brief rally towards the end of last week, will also drag on palm oil futures.
The U.S. March soyoil contract was slightly down 0.1%, while the May soybean oil contract on the Dalian Commodity Exchange rose 0.1%.

Palm, soy and crude oil prices at 1012 GMT
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Contract	Month	Last	Change	Low	High	Volume
MY PALM OIL	FEB6	2387	+5.00	2380	2398	244
MY PALM OIL	MAR6	2448	+13.00	2429	2452	5653
MY PALM OIL	APR6	2475	+15.00	2452	2479	21123
CHINA PALM OLEIN	MAY6	4692	+36.00	4638	4696	1030528
CHINA SOYOIL	MAY6	5608	+4.00	5568	5638	656944
CBOT SOY OIL	MAR6	30.38	-0.60	30.21	30.51	3322
INDIA PALM OIL	JAN6	428.90	-0.60	428.00	430.80	446
INDIA SOYOIL	FEB6	608.65	-4.00	608.60	613.80	39590
NYMEX CRUDE	MAR6	30.08	-0.26	29.25	30.33	76956

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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
India soy oil in Indian rupee per 10 kg
Crude in U.S. dollars per barrel

(US$1 = 4.2885 ringgit)
(US$1 = 67.8600 Indian rupees)
(US$1 = 6.5815 Chinese yuan)
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