Veg Oils Palm oil edges up on Borneo flood worries, weak ringgit

by **Cals** Mon 30 Dec 2013, 14:50

Veg Oils Palm oil edges up on Borneo flood worries, weak ringgit

Business & Markets 2013

Written by Reuters

Monday, 30 December 2013 14:25

KUALA LUMPUR (Dec 30): Malaysian palm oil futures edged up in thin trade on Monday to hover near a 2-week high touched at the end of last week after warnings of heavy rains over a part of palm-producing Borneo signalled tighter supplies of the tropical oil.

Malaysia's Meteorological Department has imposed "orange" and "yellow" stage advisory over several parts of Sarawak, warning of heavy intermittent rains until Tuesday that could cause flash floods in low-lying areas.

Sarawak is Malaysia's biggest state located in the Borneo region that churns out about one-sixth of the country's total palm oil production.

Floods would disrupt harvesting and transportation of palm fruit in the No.2 producer, further squeezing palm supplies, after output was dented by monsoon rains which displaced about 60,000 people in parts of Peninsular Malaysia in early December.

"The market is positioning itself ahead of the second wave of floods," said a trader with a local commodities brokerage in Malaysia.

"Investors are a bit worried because of the rains. Nobody wants to stay on the sell side -- they would rather stay defensive," the trader added.

By the midday break, the benchmark March contract on the Bursa Malaysia Derivatives Exchange had inched up 0.3 percent to 2,641 ringgit ($803) per tonne.

Prices had hit a peak of 2,653 ringgit on Friday, the strongest since Dec. 12, in a rebound driven by a weaker ringgit, bargain hunting and worries about supply due to monsoon floods.

Total traded volume stood at a mere 2,444 lots of 25 tonnes compared with the average 12,500 lots as trading slowed to a trickle due to the year-end holidays.

The Malaysian ringgit, which fell another 0.17 percent against the greenback on Monday, also stoked buying interest from overseas buyers and refiners.

The ringgit has lost more than 7 percent so far this year, weakening alongside most emerging Asian currencies which have suffered losses to the dollar with the U.S. Federal Reserve to start tapering its stimulus in January.

Technicals showed that Malaysian palm oil is expected to rebound into a range of 2,883-3,058 ringgit per tonne over the next three months, as indicated by a Fibonacci retracement analysis and an inverted head-and-shoulders, according to Reuters market analyst Wang Tao.

Traders will also be watching for December's full-month palm oil export data from cargo surveyors to be released on Tuesday to gauge demand for the tropical oil.

In other markets, Brent oil held steady above $112 per barrel on Monday, supported by continued unrest in oil-producing African nations. In other competing vegetable oil markets, the U.S. soyoil contract for March fell 0.1 percent, while the most active May soybean oil contract on the Dalian Commodities Exchange gained 0.4 percent. - Reuters