Malaysian palm oil futures edged up on Wednesday as the ringgit continued to fall, but investor caution over rising palm output in the world’s No.2 producer capped gains.
A weaker ringgit makes the feedstock cheaper for overseas buyers and refiners. The currency fell 0.54 per cent to 3.2330 against the US dollar early Wednesday, according to Reuters data.
But prospects of swelling global edible oil supplies in the coming months have dampened investor sentiment.
"Even with the weaker ringgit, the upside is limited," said a trader with a local commodities brokerage. "It’s difficult to avoid suspicion of the bearish fundamental story as it’s widely known that there is an output surplus."
Malaysian palm oil production in January-August rose 5.6 per cent by about 630,000 tonnes compared with the same period last year, according to industry regulator the Malaysian Palm oil Board.
The Kuala Lumpur-based trader said Malaysia’s crude palm oil production could hit a record 19.2 million tonnes this year.
Production was 18.79 million tonnes in 2012 and 18.91 million tonnes in 2011.
By the mid-day break, the benchmark December contract on the Bursa Malaysia Derivatives Exchange had risen 0.2 per cent to RM2,306 per tonne. Prices traded in a tight range between RM2,300-RM2,316.
Total traded volumes stood at 9,256 lots of 25 tonnes each, lower than the average 12,500 lots.
Exports of Malaysian palm oil products in September 1-25 rose 6.5 per cent to 1,238,312 tonnes, said cargo surveyor Intertek Testing Services (ITS), as demand from India picked up. Another cargo surveyor will release its export data later Wednesday.
The trader added that investor interest in crude palm oil futures had turned dry, keeping prices rangebound, as some market players were uncertain about the US tapering its mega monetary stimulus.
"Open interest in the Malaysian Derivatives Exchange has been plunging daily — in the last eight weeks it fell by 23 per cent from 202,901 to 155,839 contracts. This is mainly due to foreign fund liquidation, and the US Fed’s unclear stand on the date to scale back its QE3 policy," the trader said.
Technicals showed that Malaysian palm oil is expected to drop to RM2,017 per tonne over the next three months, as it is riding on a steady downtrend, said Reuters market analyst Wang Tao.
In other markets, Brent crude oil futures climbed towards US$109 a barrel as investors remained sceptical whether relations between the US and Iran would thaw, and if that would affect a long-running nuclear dispute.
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 was flat.-- Reuters