Palm oil futures saw an increase on Monday, driven by speculative buying and short covering, but the rise was limited due to weaker crude oil prices. The benchmark palm oil contract for December delivery on the Bursa Malaysia Derivatives Exchange climbed 22 ringgit, or 0.51%, reaching 4,372 ringgit ($1,018.88) per metric ton by midday. This followed a 2.76% gain in the previous session.
According to Paramalingam Supramaniam, director at the Selangor-based brokerage Pelindung Bestari, speculative buying and short covering were the primary factors influencing the market. However, he pointed out that while Malaysian production estimates were lower, Indonesian production was growing significantly, which might limit future gains once speculative buying slows down.
In the global edible oils market, Dalian’s most active soyoil and palm oil contracts saw increases of 0.36% and 2.06%, respectively. Conversely, soyoil prices on the Chicago Board of Trade dropped by 0.55%, following a decline in the CBOT soybeans contract due to expectations of a record U.S. harvest. Palm oil prices often follow the movements of competing edible oils as they vie for a share of the global market.
On the currency front, the ringgit, which is the currency used in palm oil trade, weakened by 0.16% against the U.S. dollar. Meanwhile, oil prices also dropped, impacted by data showing a decline in China’s inflation rate and uncertainty around the country’s economic stimulus plans. This led to concerns about fuel demand in China, the largest crude oil importer in the world. Weaker crude oil futures tend to make palm oil less attractive as a biodiesel feedstock.
In terms of imports, India’s palm oil intake in September fell by nearly a third compared to the previous month, reaching a six-month low, largely due to higher prices. Additionally, sunflower oil imports in India hit a ten-month low during the same period, according to the Solvent Extractors’ Association of India.
Looking ahead, palm oil may face resistance at the 4,406 to 4,432 ringgit range, with a potential breakout opening the path towards 4,483 ringgit, as noted by Reuters technical analyst Wang Tao.
While palm oil futures are currently benefiting from market speculation, external factors such as crude oil prices, production rates in Indonesia, and global edible oil market dynamics will play a crucial role in determining future trends.
Dekel Agri-Vision PLC (LON:DKL) aspires to become a leading agro-industrial company in West Africa, one that creates value for shareholders whilst at all times placing the interests of the local communities and environment in which it operates in at the heart of its operations.
