VEGOILS - Palm flattens as El Nino worries counter rising stock levels. Still poised for a second weekly gain

Malaysian palm futures traded at a?tight range on Friday as concerns about El Nino and the impact of higher inventories on production were offset by concerns over a firmer crude oil price.

By midday, the benchmark palm oil contract for October delivery at the Bursa Derivatives Exchange had risen 3 ringgit or 0.06% to 4,727 Ringgit ($1,158.01).

The contract is up 1.03% this week, and on course for a second consecutive weekly gain.

David Ng, a proprietary trading at Kuala Lumpur's Iceberg X Sdn Bhd, said that the prices were impacted by a higher end-July stock and a weaker Chicago soybean oil, but worries about El Nino-related weather disruptions, as well as higher energy costs, limited losses. Malaysian palm oil stocks reached a five-month peak in July, as production was above the rising demand for exports. This is according to data released by the Malaysian Palm Oil Board on Monday.

Dalian's palm oil contract, which is the most active contract, increased by 0.78%. Chicago Board of Trade soyoil prices were down by 0.09%.

Palm oil follows the price movement of other edible oils as it competes to gain a share in the global vegetable oils market. After the United States threatened a naval blockade against Iran for an indefinite period, oil prices began to rise. This rekindled concerns over the supply of crude after the previous session’s decline on the back of weaker demand and a large build-up in U.S. stockpiles.

Palm oil is a better option as a biodiesel feedstock because crude oil futures are stronger.

The palm currency, the ringgit, has strengthened by 0.12% against the dollar, making it slightly more expensive to buyers who hold foreign currencies. Solvent Extractors' Association of India reported that India's edible oils imports increased to their highest level in ten months during July, as refiners increased purchases of palm and soyoil ahead of the festival period.

(source: Reuters)