Malaysian palm oil futures eased on Thursday after the ringgit jumped higher following the US Federal Reserve’s surprise decision to postpone any reduction in its bond-buying programme, eating into profits for overseas buyers.
The ringgit rose more than two per cent early Thursday after the Fed stunned markets and decided not to taper its monthly purchases of US$85 billion in US bonds just yet.
Although the move bolstered the value of commodities priced in the dollar and lifted soy, crude oil and other markets, it made ringgit-priced palm oil more expensive for overseas buyers and kept a lid on gains.
"Because the Fed’s stimulus is still on, most investors are talking about pumping more money into commodity markets," said a trader with a foreign commodities brokerage in Kuala Lumpur.
"But for palm oil, the stronger ringgit has weighed down the market and offset optimism on the Fed’s move," the trader said.
By the mid-day break, the benchmark December contract on the Bursa Malaysia Derivatives Exchange had lost 0.7 per cent to RM2,306 per tonne. Prices earlier had dropped to RM2,296, near a one-month low of RM2,294 hit on Tuesday.
Total traded volumes stood at 16,350 lots of 25 tonnes each, sightly above the average 12,500 lots.
On the technical front, Malaysian palm oil may fall to RM2,270 per tonne, according to Reuters market analyst Wang Tao.
Indonesia and Malaysia, the world’s top producers that contribute about 90 per cent of global palm oil supply, are expected to see higher output starting this month as oil palm trees enter the peak production cycle.
Leading industry analyst Dorab Mistry said last week that the higher output cycle could last into April 2014, adding to the supply of competing oilseeds and dragging prices to new lows in January.
Prices have lost 4.1 per cent so far this month.
Strong demand for the tropical oil has helped prop up sentiment. Data from cargo surveyors showed that exports of Malaysian palm oil in the first half of September climbed between 12-14 per cent compared to the same period in August.
Investors will be watching for export data for the September
1-20 period, to be released on Friday, to gauge demand.
Brent crude rose toward US$111 a barrel on Thursday, extending gains for a second day after the US Fed kept its monetary stimulus programme intact.
In vegetable oil markets, the US soyoil contract for December rose 0.5 in early Asian trade. The Dalian Commodities Exchange is closed from September 19 onwards for the Mid-Autumn Festival and will resume trading on Monday.-- Reuters