Thursday, 26 March 2015 17:17
KUALA LUMPUR: Malaysian palm oil futures rose on Thursday, tracking crude oil prices that surged as fighting in the Middle East intensified.
Brent prices shot up nearly 6 percent after Saudi Arabia and its Gulf Arab allies began a military operation in Yemen, but the benchmark came off its high near $ 60 as importers saw no immediate threat to supplies.
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Higher crude prices could attract interest for palm-based biodiesel. Demand for palm from the biodiesel sector has taken a hit as a rout in oil prices over the past year made palm unattractive for blending purposes.
“Crude oil went up sharply on the back of the uncertainty in the Middle East. Malaysian palm oil got a ride from that,” said a trader with a foreign commodities brokerage in Kuala Lumpur.
“There was a lot of covering in palm,” the trader added. “Strength in crude oil is favourable for biofuel.”
The benchmark June contract on the Bursa Malaysia Derivatives had risen 1.2 percent to 2,194 ringgit ($ 600) a tonne by Thursday’s close, stretching gains into a second day. Prices touched 2,204 ringgit earlier in the session.
Total traded volume stood at 46,596 lots of 25 tonnes, above the average 35,000 lots.
Data showing rising palm exports from No.2 producer Malaysia also provided some support to prices.
Data from Intertek Testing Services showed Malaysian palm oil shipments between March 1-25 rose 3.5 percent versus the same period in February, while surveyor Societe Generale de Surveillance reported a 3.7 percent increase. The last time the data recorded a rise was in late December.
But persistent worries that abundant global edible oils supply will overwhelm demand this year kept a lid on gains.
Meanwhile, the Malaysian Palm Oil Association, a group of growers, estimate that the country’s crude palm oil production climbed 16.8 percent in the March 1-20 period, as flood-hit yields in the Borneo region recovered.
In other competing vegetable oil markets, the US soyoil May contract rose 1.4 percent in late Asian trade, while the most active September soybean oil contract on the Dalian Commodity Exchange edged up 0.2 percent.
Copyright Reuters, 2015
