Malaysian palm oil futures jumped to their highest in one and a half months on Monday, lifted by gains in the China and US soy markets after positive economic data from the world’s No.2 edible oil consumer China signalled growing food and fuel demand.
The US soyoil contract for December rose 0.7 per cent in early Asian trade, while the most-active January soybean oil contract on the Dalian Commodities Exchange rose 1.6 per cent.
The palm market generally tracks soyoil, a competing vegetable oil that can be used as a substitute to the tropical oil.
"The market is up on the back of China and US soybean oil markets," said a trader with a foreign commodities brokerage.
"Now it’s holding at RM2,400, which is a strong short-term support level," the Kuala Lumpur-based trader added.
Demand for palm was also seen steady, lending support to prices.
Exports of Malaysian palm oil during October 1-20 rose three per cent to 1,026,488 million tonnes, cargo surveyor data showed early Monday, boosted by buying from Europe and China.
By the mid-day break, the benchmark January contract on the Bursa Malaysia Derivatives Exchange had risen 0.8 per cent to RM2,419 per tonne. Prices earlier rose to RM2,446, the highest level since September 9.
Total traded volume stood at 8,057 lots of 25 tonnes each, much lower than the usual 12,500 lots.
Technicals are bearish. Malaysian palm oil faces resistance at RM2,449 per tonne and may retrace to RM2,406 ringgit, Reuters market analyst Wang Tao said. But he added that a rise to RM2,461 could confirm a break above resistance, leading to a new resistance target of RM2,491.
Gross domestic product in China’s giant economy rose 7.8 per cent from a year earlier, its quickest pace this year, giving a boost to commodity markets including oil.
"China is the world’s second-largest consumer for palm oil after India — the positive outlook in China’s economy is likely to support demand for the commodity," said Phillip Futures analyst Tan Chee Tat in a note on Monday.
Palm oil prices have climbed 4.3 per cent so far in October, fuelled by optimism that output volumes in Malaysia, the world’s second-largest producer, may not surge as much as earlier estimated.
Traders and planters say despite being slated for the highest-producing month this year, October’s production pace could only clock a tiny increase, leaving stocks below the 2-million-tonne mark.
Stocks currently stand at 1.78 million tonnes.
Market players will be watching for another cargo surveyor Societe Generale de Surveillance to issue export data for the October 1-20 period later on Monday.
Investors are also waiting for the release of nearly three weeks of delayed USDA data, including export sales figures likely to show nearly three million tonnes of soybeans were sold to overseas buyers.
In other markets, Brent crude oil futures held steady above US$110 a barrel on Monday on hopes the US Federal Reserve would delay curbing its massive economic stimulus programme until next year, which could help support oil demand in the world’s largest oil consumer.-- Reuters