JAKARTA: Malaysian palm oil futures matched an eight-month high from the previous session before tracking back to trade flat on Thursday, with traders consolidating recent gains against a backdrop of lower output expectations.
By the mid-day, the benchmark January contract on the Bursa Malaysia Derivatives Exchange rose 0.1 per cent to RM2,550 per tonne.
Earlier, prices touched RM2,573 per tonne, matching a peak from Wednesday’s session, which was the highest level since February 20.
"Today we are taking a breather but holding above RM2,500," said a trader with a foreign commodities brokerage in Kuala Lumpur.
"The export data came out down slightly, but people were not expecting much ... production is still slow and will be down this month."
Exports of Malaysian palm oil products in October fell 0.5 per cent to 1,521,928 tonnes from 1,530,292 tonnes shipped in September, cargo surveyor Intertek Testing Services (ITS) said.
Both Malaysia and Indonesia, which account for about 90 per cent of the world’s palm oil production, are now entering their monsoon weather season, with many traders now forecasting lower annual output than initially expected.
"Malaysian stocks are now back down at a manageable level," said a Singapore-based analyst. "There is also potential for production to under whelm in Indonesia and this is providing some price support, and may help with a technical squeeze.
"If a weather driven theme, it is going to be temporary so you may expect a little correction into the first quarter of next year."
Total traded volume on the Malaysian benchmark stood at 9,093 lots of 25 tonnes each, under the usual 12,500 lots.
Technicals showed Malaysian palm oil is expected to rise to RM2,630 per tonne, as it has broken above a resistance at RM2,544, said Reuters market analyst Wang Tao.
Another supporting factor for palm oil, traders said, was expectations of a rise in biodiesel use next year in both Malaysia and Indonesia, with both countries likely to impose higher biodiesel blend requirements.
"Overseas investors are under estimating Indonesian biodiesel demand," said a Jakarta-based palm trader.
In other markets, Brent crude edged lower, but held well above US$109 a barrel and was set to end October with its fourth monthly gain in five, bolstered by disruptions to shipments from key producer Libya.
In competing vegetable oil markets, the US soyoil contract for December fell 0.5 per cent in early Asian trade.-- Reuters