Malaysian palm oil futures climbed to their highest in four weeks on Wednesday as investors bet a key industry report may show palm stocks and output growth in September were smaller that initially anticipated.
Industry regulator the Malaysian Palm Oil Board (MPOB) will release official data on September’s palm stocks, production and exports in the world’s second-largest grower on Thursday.
The market has been buoyed by a Reuters survey on Monday that put end-September stocks at a six-month high of 1.91 million tonnes, but still below some earlier estimates.
"There’s some position-squaring ahead of the MPOB report," said a Malaysian trader with a local commodities brokerage.
"But it looks like the current prices have factored in most of the bullish news. I anticipate the upside will be capped between RM2,360-RM2,370 until more is known about September’s production," the trader added.
The benchmark December contract on the Bursa Malaysia Derivatives Exchange touched RM2,365 in early Wednesday trade, its highest since September 11, before easing to RM2,356 by mid-day, up 0.3 per cent from the previous session.
Total traded volume stood at 8,585 lots of 25 tonnes each, lower than the usual 12,500 lots.
Technicals showed a bullish target at RM2,401 per tonne remains unchanged for Malaysian palm oil as indicated by an inverted head-and-shoulders and a Fibonacci retracement analysis, Reuters market analyst Wang Tao said.
Analysts say palm oil prices, which are still down about 3.4 per cent so far this year, may have found a floor, helped by top producer Indonesia’s ambitious biodiesel policy that has spurred more of the tropical oil to be used in making biofuels.
"This will ensure that any significant palm oil supply increase can be converted into biodiesel, and hence keep inventory levels in check," said Kenanga Investment Bank analyst Alan Lim in a report on Wednesday.
He forecast average crude palm oil prices in 2013/14 to range between RM2,400-RM2,700 per metric tonne.
In other markets, Brent futures slipped below US$110 per barrel on Wednesday, after lawmakers in Washington made little progress to end a budget impasse that threatens to curb demand in the world’s biggest oil consumer and hurt investor confidence.
In competing vegetable oil markets, the US soyoil contract for December rose 0.1 per cent in early Asian trade. The most-active January soybean oil contract on the Dalian Commodities Exchange rose 1.1 per cent.-- Reuters