Palm prices rise on expectation of lower production and strong demand
The price of Malaysian palm oils futures rose slightly on Thursday as the market grew stronger due to lower production and demand from major destinations.
At the midday break, the benchmark palm oil contract on Bursa Derivatives Exchange for September delivery gained 18 ringgit (0.45%) to $3,983 ringgit (USD $943.39) a metric tonne. The contract dropped 3.9% over the last two sessions.
David Ng is a proprietary trader with Kuala Lumpur's trading firm Iceberg X Sdn Bhd. He said that crude palm oil futures were higher due to the expectation of continued growth in production and exports over the next few weeks.
He added, "We are seeing a slowdown in the production rate and a robust demand for future years."
On July 10, the Malaysian Palm Oil Board will release its June demand and supply data.
Dalian's palm oil contract, which is the most active contract, rose 0.1%. Chicago Board of Trade Soyoil Prices were down by 0.27%.
As palm oil competes to gain a share in the global vegetable oils industry, it tracks the price fluctuations of competing edible oils.
Bursa Derivatives Malaysia Exchange will be closed Friday due to a public holiday.
Crude oil prices edged higher on Thursday, continuing gains made the day before. A larger-than expected drawdown in U.S. crude inventories signaled a strong demand while investors were cautious over the Iran-Israel truce and the stability of the Middle East.
Palm oil is a better option as a biodiesel feedstock because crude oil futures are stronger.
The palm ringgit's trade currency strengthened by 0.31% against dollars, increasing the price of the commodity for buyers who hold foreign currencies.
Exports of palm oil products from Malaysia for the period June 1-25 increased between 6.6% to 6.8% compared with a similar period last month.
A circular posted on the Malaysian Palm Oil Board's website revealed that Malaysia had lowered the crude palm oil price reference for July, which reduced the export duty from 10% to 8.5%.
Technical analyst Wang Tao stated that palm oil could retest the support level of 3,978 Ringgit per ton with a high probability of breaking through and falling toward 3,938 Ringgit.
(source: Reuters)
