Malaysian palm oil futures edged up on Friday to snap three straight sessions of losses, although predictions that supply of the tropical oil will surge in the next few months muted investor interest and kept prices near month-and-a-half lows.
Palm oil supply could outstrip demand as top world producers Indonesia and Malaysia head into seasonally higher output cycles, analysts and traders say, further depressing prices which have been on a losing streak since 2011.
Prices fell 16.2 per cent in 2011, 23.2 per cent in 2012, and have dipped 6.2 per cent so far this year.
But a weak ringgit currency, which makes the feedstock cheaper for overseas buyers, helped check losses to a fall of 0.6 per cent this week, despite bearish investor sentiment.
The ringgit eased 0.08 per cent to 3.2170 against the dollar in early Friday trade, keeping prices rangebound between RM2,266 and RM2,286 per tonne.
"The market is moving in a tight range today. There are no new factors, and nothing much is happening in the external markets," said a trader with a foreign commodities brokerage.
"Market players expect production to seasonally pick up towards the beginning of the monsoon season," the trader added.
By the mid-day break, the benchmark December contract on the Bursa Malaysia Derivatives Exchange had edged up 0.8 per cent to RM2,286 per tonne. Prices earlier dipped to RM2,266, near one-and-a-half month lows seen on Thursday.
Total traded volumes stood at 10,166 lots of 25 tonnes each, below the average of 12,500 lots.
Amid forecasts of surging output, both Indonesian and Malaysian governments have pledged to boost domestic consumption of palm oil for biodiesel to help whittle down stockpiles.
Palm oil feedstock is often used as a green alternative to produce biofuels.
Indonesia’s consumption of its palm oil is expected to rise by 5.9 per cent to 9 million tonnes in 2014, fuelled by a mandatory policy to raise palm oil’s proportion in diesel to 10 per cent from 7.5 per cent, Indonesian Palm Oil Board chairman Derom Bangun said.
The second-largest producer, Malaysia, said it was looking to push forward the same policy from its current five per cent requirement, but has not yet specified details.
In other markets, Brent crude dropped below US$109 a barrel on Friday and was heading for its third straight weekly loss, as fading worries over Syria and Iran helped ease Middle East supply risks.
In vegetable oil markets, the US soyoil contract for December eased 0.4 per cent in early Asian trade. The most-active January soybean oil contract on the Dalian Commodities Exchange fell 0.5 per cent.-- Reuters