Malaysian palm oil futures inched up on Friday after export data signalled improving demand for the tropical oil, while a possible shortage of competing edible oil supply from the Philippines lifted prices of palm-based substitutes.
Exports of Malaysian palm oil products dropped 4.6 per cent in the first half of November, cargo surveyor Intertek Testing Services said, a slight improvement from shipments in the November 1-10 period which fell a steeper 13 per cent.
"The exports are not so bad. Towards the second half of the month, exports should improve further because China will be buying to replenish their stocks before their Lunar New Year festival in January," said a trader with a foreign commodities brokerage.
By the mid-day break, the benchmark January contract on the Bursa Malaysia Derivatives Exchange had inched up 0.4 per cent to RM2,599 per tonne, on course for its fifth weekly gain in six. Prices moved in a tight range between RM2,571-RM2,599.
Total traded volume stood at 11,519 lots of 25 tonnes each on Thursday, lower than the average 12,500 lots.
Palm oil prices surged this week and is on track to post a weekly gain of 3.6 per cent, fuelled by fears that super typhoon Haiyan had caused severe damage to coconut crops in the Philippines, disrupting coconut oil supply from the world's biggest exporter.
A shortage of the edible oil would channel demand to palm oil-based alternatives such as palm kernel oil, commonly used as a raw material to produce soaps and cosmetics.
Trade volumes however are low with investors staying away from risky bets as they waited for more information on palm oil production. Output in October rose to 1.97 million tonnes and market players are expecting November to produce smaller yields.
"Investors are looking for new leads besides the Philippine issue. They want to see how the export and production situation turns out," the Malaysia-based trader added.
The Malaysian government will also announce its December crude palm oil export tax later Friday. The No.2 producer has kept its export duty at 4.5 per cent since March.
Another cargo surveyor Societe Generale de Surveillance will also release export data for the November 1-15 period late Friday.
Technicals showed that Malaysian palm oil is biased to drop to its Wednesday low of RM2,565 per tonne, as it has not completed correction from the November 1 high of RM2,632, said Reuters market analyst Wang Tao.
In other markets, Brent oil futures held above US$108 a barrel on Friday, heading for its biggest week since early July on expectations the Federal Reserve will stick with its easy money policy for now.
In competing vegetable oil markets, the US soyoil contract for December rose 0.4 per cent in early Asian trade.
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