FCPO Related News

Crude palm oil futures on Malaysia’s derivatives exchange ended higher Tuesday as speculative investors snapped up cheap positions after recent declines and higher Sept. 1-25 palm oil exports. The benchmark December contract at Bursa Malaysia Derivatives ended 0.9% higher at 2,669 ringgit a metric ton after moving in a MYR2,607-MYR2,676/ton range.

"The word ‘oversold’ was taken seriously today after a massive sell-off Monday. We also saw speculators buying back contracts, while the absence of planters selling physical CPO had end-buyers coming in to hedge palm futures," a trading executive at a Kuala Lumpur-based brokerage said. Malaysia’s Sept. 1-25 palm oil exports rose 11% from a month earlier to 1.17 million tons, due to increased shipments to China and India, according to cargo surveyor SGS (Malaysia) Bhd. Another surveyor, Intertek Agri Services, said Sept. 1-25 exports also reached 1.17 million tons, an increase of 8.3%. High inventory levels weighed on palm oil prices, although CIMB Research noted that "prices have fallen to a level that [could] encourage biodiesel demand and a switch from soyoil," as soyoil is currently offered at a wide premium of $310/ton to rival palm oil compared with a historical average of $100-$120/ton.

"We expect a recovery in prices by year-end, to around MYR2,800-MYR3,000/ton…demand for palm oil will pick up by then," CIMB Research said, tipping palm oil stockpiles in Malaysia, the world’s largest producer after Indonesia, to peak at 2.43 million tons in October. Inventory levels in Malaysia reached 2.12 million tons at end-August, according to data from industry regulator the Malaysian Palm Oil Board.

But less optimistic trading executives expect palm oil to pull back further amid renewed concern about Europe’s economic situation. "Today’s rebound is merely a brief correction. I don’t think the market has bottomed out and prices could fall below the two-year low mark of MYR2,577/ton in the near term," said Chandran Sinnasamy, trading head at Kuala Lumpur-based LT International. He tips medium-term support at MYR2,430/ton.