Malaysian palm oil futures hit their highest in more than one month on Monday, stretching gains into a fourth straight session as a rally in overseas soy markets continued to lift prices of the tropical oil. Palm was also boosted by a report which showed that stockpiles in Malaysia, the second-largest producer, had eased for the first time since June.
Data from industry regulator, the Malaysian Palm Oil Board, on Monday showed palm oil stocks fell a steeper-than-expected 2.6 percent to stand at 1.93 million tonnes at end-January due to seasonally slowing output, although exports remained weak. "There is a heatwave in Brazil and soybeans have been rallying for the past week. Soyoil got a free ride from there, and palm oil is following through," said a trader with a foreign commodities brokerage in Kuala Lumpur.
"I believe prices will trade within a range of 2,500-2,620 ringgit." The benchmark April contract on the Bursa Malaysia Derivatives Exchange inched up 1.5 percent to 2,616 ringgit ($783) per tonne by Monday's close, hitting its highest level since January 6. Prices traded in a range of 2,587 to 2,618 ringgit.
Total traded volume stood at 38,281 lots of 25 tonnes, above the average 35,000 lots. Chicago soybeans were little changed on Monday, holding on to last week's biggest gain in more than five months on expectations the US government will reduce its supply estimates in a key report due later in the day.
Tighter supplies of the competing oilseed for crushing would lift soyoil prices, and could make buyers switch to the cheaper palm oil instead, as both edible oils are commonly substituted for each other. The most active May soybean oil contract on the Dalian Commodities Exchange and US soyoil contract for March both gained 1.4 percent in late Asian trade. A slight recovery in exports in the first 10 days of February also raised hopes of improving food and fuel demand for palm, although traders said export volumes will have to pick up faster to have any bigger impact on prices.
Cargo surveyor Intertek Testing Services showed Malaysia's February 1-10 exports rose 4.1 percent to 309,455 tonnes from 297,308 shipped in the same period in January. Another cargo surveyor Societe Generale de Surveillance reported that exports rose 8.4 percent to 308,485 tonnes for the same period. "Exports are slightly better, but I don't think they are very bullish. If you compare them to last month it is up 4 percent, but then the export volumes were very low in January," the trader added. Technicals were bullish. Malaysian palm oil is expected to test resistance at 2,597 ringgit per tonne, with a good chance of breaking above this level and rising further to 2,623 ringgit, said Reuters market analyst Wang Tao.
