Vegoils Palm extends gains to 4-wk high ahead of key industry report

by **Cals** Thu 10 Oct 2013, 02:15

Vegoils Palm extends gains to 4-wk high ahead of key industry report

Business & Markets 2013

Written by Reuters

Wednesday, 09 October 2013 18:32

KUALA LUMPUR (Oct 9): Malaysian palm oil futures climbed to their highest level in four weeks on Wednesday as investors bet a key industry report would show that palm stocks and output growth in September were lower than anticipated.

Industry regulator the Malaysian Palm Oil Board (MPOB) will release official data on September's palm stocks, production and exports in the world's second-largest grower on Thursday.

The market has been buoyed by a Reuters survey on Monday that put end-September stocks at a six-month high of 1.91 million tonnes, but that is still below some estimates.

"There's some position-squaring ahead of the MPOB report," said a Malaysian trader with a local commodities brokerage.

"But it looks like the current prices have factored in most of the bullish news. I anticipate the upside will be capped between 2,360-2,370 ringgit until more is known about September's production," the trader added.

The benchmark December contract on the Bursa Malaysia Derivatives Exchange touched 2,371 ringgit ($741) in late Wednesday trade, its highest since Sept. 10, before easing to 2,368 ringgit by the close, up 0.8 percent from the previous session.

Total traded volume stood at 25,983 lots of 25 tonnes each, much lower than the usual 35,000 lots.

Technicals showed a bullish target at 2,401 ringgit per tonne remains unchanged for Malaysian palm oil as indicated by an inverted head-and-shoulders and a Fibonacci retracement analysis, Reuters market analyst Wang Tao said.

The weaker local currency in late trade also supported prices, making the feedstock cheaper for overseas buyers. The Malaysian ringgit inched down 0.17 percent against the U.S. dollar.

Analysts say palm oil prices, which are still down about 3 percent this year, may have found a floor, helped by top producer Indonesia's ambitious biodiesel policy that could mean more of the tropical oil will be used in making biofuels.

"This will ensure that any significant palm oil supply increase can be converted into biodiesel, and hence keep inventory levels in check," said Kenanga Investment Bank analyst Alan Lim in a report on Wednesday.

He forecast average crude palm oil prices in 2013/14 would range between 2,400-2,700 ringgit per metric tonne.

In other markets, global oil prices dropped below $110 per barrel on Wednesday after U.S. lawmakers made little progress to end a budget impasse that threatens to hurt investor confidence and curb demand in the world's biggest oil consumer.

In competing vegetable oil markets, the U.S. soyoil contract for December rose 0.1 percent in late Asian trade. The most active January soybean oil contract on the Dalian Commodities Exchange rose 0.9 percent.