Malaysian palm oil futures ended higher for the third straight day on Monday but trade was thin, with most investors steering clear of risky bets as they waited for an industry report on palm stocks and production in the world’s second-biggest producer.
Stocks in September may have jumped to 1.91 million tonnes, their highest in six months, as strong seasonal output trumped robust export demand, a Reuters survey showed on Monday.
Production is expected to surge 15 per cent in September from a month before as oil palm trees seasonally produce more fruit.
Stockpiles could climb above 2.0 million tonnes again, putting more downward pressure on prices, which have lost five per cent so far this year.
Stocks surged to a record high of 2.67 million tonnes last December but had shrunk to 1.67 million tonnes at the end of August.
Official data for September’s end-stocks, exports and output will be released by the industry regulator, the Malaysian Palm Oil Board (MPOB), on Thursday, October 10.
"Markets are quiet today, especially with Dalian closed. Traders are preparing for the MPOB release," said a trader with a local commodities brokerage.
Chinese markets, including the Dalian Commodities Exchange, are closed for a public holiday and will reopen on Tuesday.
By Monday’s close, the benchmark December contract on the Bursa Malaysia Derivatives Exchange had edged up 0.6 per cent to RM2,318 per tonne. Prices traded in a tight range between RM2,303 and RM2,329.
Total traded volume was thin at 26,984 lots of 25 tonnes each, much lower than the average 35,000 lots.
Technicals showed that Malaysian palm oil remained neutral in a range of RM2,270 to RM2,334 per tonne, Reuters market analyst Wang Tao said.
The shutdown of the US government could weigh on palm prices if the situation is prolonged.
The uncertainty could drag on the US dollar against the ringgit, making the ringgit-priced palm feedstock more expensive for overseas buyers and refiners. The ringgit was trading slightly lower at 3.1880 per dollar late on Monday.
"It may indirectly affect palm in the sense that the US dollar will weaken, and in turn strengthen the ringgit, which will put pressure on the palm oil market," said a Kuala Lumpur-based trader.
In other markets, Brent crude fell more than one per cent to below US$108 a barrel on Monday as oil production resumed in the Gulf of Mexico after a tropical storm, while concern over the US government shutdown clouded the outlook for demand.
In competing vegetable oil markets, the US soyoil contract for December edged down 0.2 per cent in late Asian trade.-- Reuters