Malaysian palm oil futures inched up on Tuesday as the weaker ringgit and low price levels for the tropical oil attracted overseas buyers and refiners, with industry data due on Wednesday expected to show healthy exports.
The ringgit’s poor performance helped palm prices to recover some of Monday’s losses. Palm oil futures on Monday fell to RM2,279, the lowest since August 14, after warnings that a large supply of vegetable oils would soon flood the market and drag prices to new lows in 2014.
The ringgit in early Tuesday trade eased another 0.4 per cent against the US dollar, making palm oil cheaper for overseas buyers.
"Last week the ringgit appreciated a little too much. Now we’re expecting the ringgit to weaken and that will be supportive of the market," said a trader with a foreign commodities brokerage in Kuala Lumpur.
"Food industries and some other end-consumers are very under-covered, so whenever prices dip a bit they will take the opportunity to come in and buy," the trader added.
By the mid-day break, the benchmark December contract on the Bursa Malaysia Derivatives Exchange had risen 0.6 per cent to RM2,323 per tonne. Prices traded in a tight range between RM2,318-RM2,329.
The trader said he expects prices to stay within a range of RM2,250-RM2,400, "because we don’t have any new factors to move the market much lower or higher."
Total traded volumes stood at 7,322 lots of 25 tonnes each, much lower than the average 12,500 lots.
Prices have shed nearly 5 percent so far this year, extending losses from the 23.2 per cent fall suffered in 2012 -palm’s worst annual performance since the global financial crisis in 2008.
But rising demand for the tropical oil could help prop up price.
Edible oil imports of world’s No.1 buyer India could rise four per cent to a record 10.7 million tonnes in 2013/14 due to growth in consumption, with the entire rise coming from refined palm oil, a leading trade expert told the Globoil Conference in India last weekend.
Market players will be watching for export data for the September 1-25 period, due to be released on Wednesday by cargo surveyors.
Exports in the first twenty days rose between 9-13 per cent.
In other markets, Brent crude edged down near US$108 a barrel as geopolitical tensions eased slightly ahead of nuclear talks involving Iran and the US later this week, while rising oil supply from Iraq and Libya weighed on prices.
In vegetable oil markets, the US soyoil contract for December edged up 0.3 per cent in early Asian trade. The most-active January soybean oil contract on the Dalian Commodities Exchange rose 0.9 per cent.-- Reuters