Palm futures stable as strong ringgit and rising production offset boost from rival oil

Malaysian palm oils futures were in a tight range Thursday, as participants waited for cues from the market amid support by rival vegetable oil. However, despite a strong Ringgit and increasing production, gains were limited.

By midday, the benchmark contract for palm oil delivery in July on the Bursa Derivatives exchange had fallen 14 ringgit or 0.35% to 4,023 Ringgit ($917.45).

Early trade saw the contract fluctuate between 4,005 and 4,054 Ringgit per ton, after closing last session at 4,037 Ringgit.

A Kuala Lumpur based trader stated that "Today crude Palm Oil Futures is still consolidating, after yesterday's supportive news about demand from India and the rising production of Malaysian Palm Oil Association", adding that the market was awaiting additional cues.

The trader stated that the rally in prices may be capped by rising production, and the stronger Malaysian Ringgit, which is the currency used for trade contracts.

The contract became less attractive to foreign currency holders as the ringgit increased by 0.07% in value against the U.S. Dollar.

Dalian's palm oil contract, which is the most active contract in Dalian, gained 0.86%. Chicago Board of Trade Soyoil Prices rose by 0.54%.

As palm oil competes to gain a share in the global vegetable oil market, it tracks the price changes of competing edible oils.

Four dealers reported that India had increased its palm oil purchases following a five-month lull. A correction in the price of the tropical oil made it cheaper than soyoil rivals, which encouraged refiners place orders to replenish their inventories.

According to Wang Tao, technical analyst, palm oil could retrace to a range between 3,929 and 3,968 Ringgit per metric tonne, after failing to break through resistance at 4,072 Ringgit.

(source: Reuters)