Asian Crude Palm Oil Ends Up On Short Covering, Steady Crude (06 Jan 2009)
Crude palm oil futures on Malaysia's derivatives exchange rose Wednesday for the fifth consecutive trading day on short covering and firmer crude oil prices.
The benchmark March contract on Bursa Malaysia Derivatives ended MYR20 higher at MYR2,702 a metric ton after rising to a seven-month high of MYR2,726. CPO prices have risen 9.3% in the last 30 days.
"There's potential for CPO to rise further" with crude oil trading the $81-$82 range, said a Kuala Lumpur-based trading executive. But other trade participants were more cautious, pointing out that the rally may be headed for a downward correction as domestic palm oil inventories move higher–toward the psychological level of 2 million tons.
They said a moderate decline in Malaysia's December palm oil output and weak export demand are preventing further gains in the CPO market. "December palm oil output didn't fall as much as in November. Output is likely down only 5%-7% on month," said a company executive at a major plantation company.
In November, palm oil production fell nearly 20% from October, to 1.60 million tons, as floods and heavy rain in oil-palm-growing regions disrupted harvesting and transportation of palm fruits to mills and refineries. Meanwhile, heavy rain is expected to continue over the eastern province of Sarawak through Sunday, according to the Malaysian Meteorological Department.
Higher soyoil prices during Asian trading hours also provided support for palm oil. March soyoil on the Chicago Board of Trade was trading 10 points higher at 41.20 cents a pound by the end of trade on BMD. At 1024 GMT, light, sweet crude for March delivery on the New York Mercantile Exchange was trading 5 cents lower at $81.72 a barrel.
In the cash market, palm olein for February traded at $820/ton, April/May/June was $842.50/ton free-on-board Malaysian ports, a Singapore-based broker said. Cash CPO for prompt delivery was offered MYR15 higher at MYR2,650/ton. Open interest on the BMD was 76,088, up from 75,181 lots traded Tuesday. One lot is equivalent to 25 tons. A total of 14,379 lots of CPO were traded versus 12,031 lots traded Tuesday.
