Palm oil up on output expectations

Malaysian palm oil futures edged up in tight trade on Tuesday on optimism that slower production of the tropical oil will keep stockpiles in check this year, but concerns about sluggish export demand capped gains.

Industry data on Monday showed that palm oil output inched up just 3.1 per cent in October from September as monsoon rains dented the harvesting of fresh fruit bunches, with production tapering off now the peak season is ending.

A report released by the industry regulator, the Malaysian Palm Oil Board (MPOB), showed end-October stocks at 1.85 million tonnes, which fuelled hopes that inventories will stay below the 2 million tonne mark for the rest of the year.

"Post-MPOB, prices will consolidate due to the weaker ringgit and better margins," said a trader with a local commodities brokerage in Malaysia.

"The market will remain rangebound circa RM2,500-RM2,540 until more is known about demand and output for November," the trader added.

By the mid-day break, the benchmark January contract on the Bursa Malaysia Derivatives Exchange had edged up 0.1 per cent to RM2,530 per tonne.

Total traded volume stood at 13,278 lots of 25 tonnes each on Thursday, slightly above the usual 12,500 lots.

But weak exports in early November could weigh on the palm market, after keeping prices locked in a tight range between RM2,506-RM2,536 on Monday. Palm oil solidifies in cold temperatures and typically sees softer demand during winter.

Data from cargo surveyors showed exports in the November 1-10 period fell between 10 and 13 per cent compared to a month before as purchases from India and Pakistan dropped.

Technicals showed that Malaysian palm oil is expected to break support at RM2,491 per tonne and then fall further to RM2,449, Reuters market analyst Wang Tao said.

In other markets, Brent crude futures dropped towards US$106 per barrel on Tuesday as investors waited for the next round of talks on Iran's nuclear programme and possible economic reforms to be announced by Chinese leaders later in the day.

In competing vegetable oil markets, the US soyoil contract for December was flat in early Asian trade, while the most active May soybean oil contract on the Dalian Commodities Exchange fell 0.1 per cent.
Palm, soy and crude oil prices at 0600 GM