KUALA LUMPUR (June 20): Malaysian palm oil futures edged up on Friday to follow overnight gains in comparative soyoil markets, with the tropical oil on track for its biggest weekly rise since early March as crude prices continued to rise on tensions in Iraq.
Sluggish demand, however, put a lid on the gains.
Shipments of Malaysian palm oil products during June 1-20 fell 5.8 percent to 806,303 tonnes compared with the same period a month ago, cargo surveyor Intertek Testing Services data showed, as export volumes to Europe and China dived.
“People expected exports to be good because of the Ramadan period,” said a trader with a foreign commodities brokerage, referring to the Muslim holy festival starting from end-June that typically drives up consumption of the vegetable oil.
“So this (the data) is a little disappointing… the market came off a little bit after they heard of the weak exports,” the Kuala Lumpur-based trader added.
By the midday break, the benchmark September contract on the Bursa Malaysia Derivatives Exchange had edged up 0.7 percent to 2,464 ringgit ($ 766) per tonne, with prices trading between 2,459 – 2,474 ringgit.
Total traded volume stood at 14,798 lots of 25 tonnes, higher than the average 12,500 lots.
With a 1.5 percent rise so far this week, benchmark prices are poised for their biggest weekly gain since early March, as increased risks of supply disruptions from oil-producing Iraq lifted crude prices and made palm oil a cheaper option for biodiesel feedstock.
“The energy market is the main pillar supporting palm at the moment,” the Kuala Lumpur based trader said.
Brent crude held near $ 115 a barrel on Friday, close to a nine-month high and heading for its second weekly gain.
The U.S. crude oil contract increased 27 cents to $ 106.70 a barrel.
Iraqi government forces battled Sunni militants for control of the country’s biggest refinery on Thursday.
Heightened tensions could force Baghdad to import more oil products to meet its own domestic needs, further tightening energy markets and in turn boosting palm.
“Palm prices will remain firmer, on borrowed strength from crude oil and bean oil,” said another Malaysia-based commodity trader.
In competing vegetable oil markets, the U.S. soyoil contract was up 0.1 percent in early Asian trade, while the most active soybean oil contract on the Dalian Commodities Exchange gained 0.5 percent. – Reuters
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