CRUDE PALM OIL ENDS UP SLIGHTLY AFTER HITTING SIX-WEEK HIGH

Crude palm oil futures on Malaysia’s derivatives exchange ended mostly higher Tuesday, as a continuing El Nino climate event may sap yields and cut output with production already seasonally low.

The benchmark May CPO contract on the Bursa Malaysia Derivatives rose as much as 1.2% to a fresh six-week high at MYR2,662 a metric ton on short covering and speculative buying, before ending MYR4 higher at MYR2,635/ton.

Malaysia’s key palm-oil producing states of Johor and Sabah are experiencing drier weather which may aggravate biological stress in trees and sap oil yields, analysts and traders said. The two states contribute around 19.3% of global CPO output, UOBKayHian said in a research note today. Malaysia contributes 41% of global CPO production.

El Nino is an occasional seasonal warming of the central and eastern Pacific Ocean that upsets normal weather patterns from the western seaboard of Latin America to east Africa.

“CPO’s supply fundamentals have turned bullish and may offset the marginal decline in export demand,” a Kuala Lumpur-based trading executive said.

Prices may rise in the next trading session to around MYR2,667-MYR2,678, she said.

Meanwhile, Indonesia’s PT KPB Nusantara, a unit of PT Perkebunan Nusantara, sold 3,500 metric tons of crude palm oil offered in a government auction, it said in a statement Tuesday.

But a further 1,000 tons of CPO also offered in the auction remained unsold after PT KPB withdrew its offer, as the bids were lower than its offer prices of IDR7,462-IDR7,513/kg.

In the cash market, palm olein for April/May/June delivery traded at $800/ton, $805/ton and $815/ton, and for July/August/September delivery at $797.50/ton, $805/ton and $807.50/ton, a Singapore-based trading executive said.

Cash CPO for prompt shipment was offered MYR10 higher at MYR2,660/ton.

Open interest on the BMD was 82,196 lots Tuesday, up from 81,398 lots Monday. One lot is equivalent to 25 tons.

Some 15,847 lots of CPO were traded versus 11,203 lots Friday.

Closing BMD Crude Palm Oil (CPO) futures prices in MYR/ton at 1000 GMT:

Month      Close    Previous   Change    High    Low
Mar 2010   2,656    2,645      Up 11     2,668   2,640
Apr 2010   2,644    2,674      Down 30   2,666   2,630
May 2010   2,635    2,631      Up 04     2,662   2,622
Jun 2010   2,627    2,623      Up 04     2,652   2,615