Palm oil prices rise on short covering

Malaysian palm oils futures rose again on Wednesday, despite the bearish outlook of industry analysts.

At closing, the benchmark palm oil contract on Bursa Malaysia's Derivatives exchange was up 42 Ringgit (0.92%) or $1,040.89 per metric ton.

A Kuala Lumpur trader stated that "since the market remained at 4,550 ringgit and there was no fresh selling, bargain buying occurred".

Analysts at a Kuala Lumpur conference this week said that a recovery in palm oil production as well as lower imports from rate-sensitive consumers will drive down prices, reducing the premium for tropical oil over its rivals.

Dalian's most active palm oil contract rose 0.22%, while the soyoil contract fell 0.75%. Chicago Board of Trade Soyoil Prices dropped 0.02%.

A senior regulator said that Malaysian palm oil stock is set to fall to its lowest level in almost two years at the end of the month, due to floods which have affected production, and Ramadan, the festival, which has boosted demand.

The palm oil supply will remain limited for two to three more months due to the floods that have hit the production of the two largest producers in the world, Indonesia and Malaysia.

The bounce from support at 4,542 Ringgit may not be complete, and palm oil could retest this resistance zone. ($1 = 4.4260 ringgit)

(source: Reuters)