Palm oil rangebound as traders seek more cues

Malaysian palm oil futures traded in a tight range on Wednesday as market participants awaited more cues from an industry conference, with a weaker ringgit and anticipation of low stockpiles in February-end lending some support.

The benchmark palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange was up 0.24% at 4,576 ringgit ($1,034.83) a metric ton by the midday break.

The contract traded between 4,546-4,588 ringgit a ton, compared to its previous close of 4,565 ringgit.

“Market currently rangebound while waiting for more cues from Palm and Lauric Oils Conference,” a Kuala Lumpur-based trader said, adding that weak ringgit and market anticipating February palm inventory remain low provide some support.

The ringgit, the contract’s currency of trade, weakened 0.05% against the US dollar, making the contract more attractive to foreign currency holders.

Palm oil’s price premium over soyoil is expected to decrease within the next one to three months, as higher prices have been moderating demand in key consuming markets such as India, leading industry analyst Thomas Mielke said.

Dalian’s most-active soyoil contract lost 1.06%, while its palm oil contract slipped 0.33%.

Soyoil prices on the Chicago Board of Trade (CBOT) fell 0.3%.

Malaysia’s palm oil stocks are set to drop to lowest in nearly two years by the end of February, as floods hit production and the Ramadan festival boosted demand, a senior regulatory official said.

Palm oil supplies will likely remain tight for the next two to three months as floods have affected production in the world’s top two producers, Indonesia and Malaysia.

Palm oil may retest the resistance zone of 4,608-4,625 ringgit per metric ton, as the bounce triggered by support at 4,542 ringgit looks incomplete.

Tags: Malaysia, palm oil, futures, benchmark contract, soyoil