KUALA LUMPUR, Mar 21: Malaysian palm oil futures rose on Thursday to their highest in more than three weeks, as refiners took advantage of a cheap local tax rate to boost crude palm oil purchases, although demand uncertainty capped gains.
Crude palm oil from No.2 producer Malaysia is currently cheaper than products from top producer Indonesia, thanks to an export tax levied at 4.5 percent, compared with Indonesia’s 10.5 percent.
Malaysian palm oil exports rose by up to 14 percent in the first 20 days of March, but investors are wary that rising prices could lead to a tax hike in May and weigh on demand. Malaysia sets its export tax on crude palm oil each month based on prices. April’s tax rate has been set at 4.5 percent.
Investors are also concerned that an import duty hike in India, the world’s biggest edible oil buyer, will crimp future demand, traders said.
‘Although the demand continues to show signs of struggling, the increase in crude palm oil buying by local refineries is suggesting for the most part everything is under control,’ said a trader with a local commodities broker in Malaysia.
By the midday break, the benchmark June contract on the Bursa Malaysia Derivatives Exchange had risen 1.3 percent to 2,474 ringgit ($793) per tonne in active trade, off an early high of 2,477 ringgit, the highest level since Feb. 25.
Total traded volume stood at 15,781 lots of 25 tonnes each, higher than the usual 12,500 lots.
Technical analysis showed Malaysian palm oil was expected to rise to 2,498 ringgit per tonne, said Reuters market analyst Wang Tao.
Traders say an export duty hike for the crude grade would turn buyers to refined palm products. Cargo surveyor data showed that refined palm olein exports almost doubled between March 1 and 20, offsetting weaker crude palm oil shipments and giving a leg up to overall exports.
The higher exports of palm oil products, alongside seasonally slowing output, would help to further ease inventory levels in Malaysia, which have edged down to 2.44 million tonnes in February from last December’s record highs.
In other markets, Brent crude held steady above $108 a barrel on Thursday as China manufacturing data pointed to a better fuel demand outlook in the world’s second largest oil user, offsetting lingering worries about contagion in the euro zone from Cyprus’s woes.
In other vegetable oil markets, U.S. Soyoil for May delivery rose 0.9 percent in early Asian trade. The most-active September soybean oil contract on the Dalian Commodities Exchange rose 1.1 percent.
(AGENCIES)
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