Malaysian palm oil futures traded in a narrow range on Thursday

Malaysian palm oil futures traded in a narrow range on Thursday, following a weakening Dalian vegetable oil market and pressured by demand concerns amid a strong ringgit.

Malaysian palm oil futures fell below 4,215 ringgit per tonne this morning on Thursday, reversing a modest gain from the previous session, as lower Dalian palm oil prices and weaker Chicago oil prices dampened buyer sentiment.

“The market is currently searching for a base; the strengthening ringgit is of little help. Demand is currently a concern, especially for forward contracts,” said Paramalingam Supramaniam, director of Selangor-based brokerage Pelindung Bestari.

Palm oil contracts traded amid concerns about production growth in the coming months, said David Ng, a trader at Kuala Lumpur-based Iceberg X. The recent strengthening of the ringgit is also weighing on market sentiment. A trader believes prices will hold above 4,150 ringgit per tonne, with resistance at 4,300 ringgit. The Bursa Malaysia derivatives contract for April delivery closed 17 ringgit higher at 4,208 ringgit ($1,066.14) per tonne.

The Malaysian ringgit, the contract currency used for trading, reached its highest since April 2018 on January 28 and has strengthened against the US dollar in recent months, making palm oil more expensive for foreign currency holders. On Thursday, the ringgit weakened 0.41% against the dollar.

“However, lower production in January, which will continue into February, will support palm oil prices,” said Supramaniam.

Palm oil prices are following the price dynamics of competing edible oils as it fights for share in the global vegetable oil market.

According to a Reuters survey, Malaysian palm oil stocks are expected to end a 10-month upward trend in January, as exports surged during a seasonal production slowdown.

Palm oil prices appear neutral in the 4,201-4,254 ringgit per metric tonne range, and a breakout from this range could indicate a directional move, according to Reuters technical analyst Wang Tao.

Tags: prices, palm oil