KUALA LUMPUR, Jan 30: Malaysian palm oil futures rose to their highest level in nearly 4 weeks on Wednesday on expectations that dry weather could hurt crops in top soy producer Argentina and shift demand to the cheaper edible oil.
Dryness in parts of Argentina, the world’s No.3 exporter of soybeans, has raised supply concerns and pushed up prices, potentially turning buyers to palm oil which is currently trading at a discount of more than $300 a tonne.
‘The rise of palm oil in the last few days is attributable to external strength. A lot of investors believe that the discount between palm and soy is quite big, and this will stir demand for palm,’ said a trader with a foreign commodities brokerage in Kuala Lumpur.
‘Buyers are always turning to cheaper options if possible. People will jump at this kind of opportunity. The cheapest oil will always prevail,’ he added.
The benchmark April contract on the Bursa Malaysia Derivatives Exchange rose to 2,493 ringgit ($809) per tonne, the highest level since Jan. 4, before rising 0.5 percent at 2,487 ringgit per tonne by the midday break.
Total traded volumes stood at 12,085 lots of 25 tonnes each, slightly smaller than the usual 12,500 lots with traders waiting for cues from January’s export data which will be released on Thursday.
Technical analysis shows palm oil is expected to rise to 2,522 ringgit per tonne, as it has cleared a resistance at 2,486 ringgit, said Reuters market analyst Wang Tao.
Leading industry analyst Dorab Mistry said on Wednesday that he expects India, the world’s biggest edible oil buyer, to hike import duties on palm oil and soyoil again by the end of March to protect its domestic oilseed farmers.
Earlier in January, India raised its imports duties on crude imports to 2.5 percent from zero and lifted a six year freeze on taxable value of cargoes to curb cheap imports from top palm suppliers Indonesia and Malaysia.
But Malaysia, the world’s No.2 producer, will continue to offer the market’s cheapest vegetable oil in February as top rival Indonesia will increase its crude palm oil export tax to 9 percent while Malaysia maintains its duties at zero percent.
Brent prices held above $114 a barrel on Wednesday on optimism about the U.S. Economy after a string of data out of the world’s largest oil consumer showed a recovery was gaining ground.
In competing vegetable oil markets, U.S. Soyoil for March delivery rose 0.4 percent in early Asian trade. The most active September soybean oil contract on the Dalian Commodity Exchange gained 0.4 percent by the midday break.
(agencies)
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