Malaysian palm oil futures were lower on Thursday as investors turned cautious about risky bets, but uncertainty about supplies of competing edible oil from the Philippines propped up prices.
Palm oil prices rose to near-two-week highs on Wednesday on concerns that Typhoon Haiyan had damaged coconut crops in the Philippines and could disrupt the supply of coconut oil from one of the world's top producers.
By the mid-day break, the benchmark January contract on the Bursa Malaysia Derivatives Exchange had edged down 0.4 per cent to RM2,595 per tonne, with prices moving in a tight range between RM2,589-RM2,617.
Total traded volume stood at 11,361 lots of 25 tonnes each on Thursday, lower than the average 12,500 lots.
Any shortage of Philippine coconut oil could channel demand to palm oil-based substitutes such as palm kernel oil. The price of crude palm kernel oil rose to RM3,802 per tonne early on Thursday from RM3,720 on Wednesday in choppy trade.
Futures market players are avoiding risk as prices hover near the RM2,600 mark, waiting for more news on export demand and Southeast Asian palm output.
"The RM2,600 level is a critical point. Buyers and sellers are a bit cautious — people are unsure and are waiting for the next bit of news before making any moves," said a trader with a foreign commodities brokerage.
"Palm kernel oil prices are choppy. Players are quite sensitive to buying and selling because of the situation in the Philippines," the Malaysia-based trader added.
Palm oil futures will probably trade in a range of RM2,400-RM2,600 over the next six months, leading industry analyst Dorab Mistry said on Thursday, but they could climb as high as RM2,800 depending on output in top producer Indonesia and the success of its biodiesel mandate.
Mistry's forecast, given at a vegetable oil meeting in China, reverses his earlier prediction that prices would be stuck in a RM2,200-RM2,400 range and could even fall to RM2,000 in early January.
Reuters market analyst Wang Tao said that technicals suggested palm oil could revisit Wednesday's low of RM2,565 per tonne because a correction from the November 1 high of RM2,632 had not been completed.
Investors are waiting for cargo surveyor export data for the first half of November, which will be released on Friday, to gauge winter demand for the tropical oil.
The Malaysian government will also announce its crude palm oil export tax for December on Friday. The No.2 producer has kept its export duty at 4.5 per cent since March.
In other markets, Brent futures held steady above US$107 per barrel on Thursday as investors balanced dovish Federal Reserve comments with expectations of a rise in US crude inventories.
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