Palm oil traders are looking for more clues as they try to predict the future of the market.

Malaysian palm futures were trading in a narrow range on Wednesday, as participants awaited further cues from a conference. A weaker ringgit was also a factor in the market's support.

By midday, the benchmark contract for palm oil delivery in May on Bursa Derivatives exchange was up 0.24% to 4,576 Ringgit ($1,034.83) per metric ton.

The contract was traded at 4,546 to 4,588 ringgit per ton, as opposed to the previous close of only 4,565.

A Kuala Lumpur based trader stated that the market is currently in a rangebound state while it waits for more information from the Palm and Lauric Oils Conference. He added that a weakening ringgit, and the fact that February palm inventories are low will provide some support.

The contract is more attractive for foreign currency holders because the ringgit, which is the contract's currency, has weakened by 0.05% in relation to the U.S. Dollar.

Thomas Mielke, a leading industry analyst, said that the price differential between palm oil and soyoil will decrease in the next three months as high prices are reducing demand, especially in India.

Dalian's palm oil contract, which is the most active contract, fell 0.33% while soyoil prices dropped 1.06%. Chicago Board of Trade Soyoil Prices fell 0.3%.

A senior official in the regulatory sector said that Malaysian palm oil stock levels are expected to reach their lowest level in almost two years at the end of the month, due to floods which have affected production and Ramadan, 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 rebound from the support level of 4,542 ringgit may not be complete, and palm oil could retest this resistance zone. ($1 = 4.4220 ringgit)

(source: Reuters)