Crude Palm Oil Ends Up; Bullish Outlook, Short Covering

Crude palm oil futures on Malaysia’s derivatives exchange ended sharply higher Thursday as bullish supply fundamentals prompted a rush to cover short positions.

Bullish statements by top oilseed analyst Thomas Mielke ahead of a palm oil conference also sent prices higher towards the end of the trading day, trade participants said.

The benchmark May contract on the Bursa Malaysia Derivatives ended MYR39 higher at MYR2,674 a metric ton, after rising as much as 2% to an intraday high of MYR2,686/ton, its highest level since Jan. 6.

"CPO futures may rise higher tomorrow after breaching key resistance at MYR2,660 today…Expect prices to rise to the MYR2,700/ton level," a senior executive from Kuala Lumpur-based commodities brokerage said.

CPO output in Malaysia may rise only 1.1% to 17.8 million tons in 2010, Mielke told Dow Jones Newswires. The forecast is lower than the government forecast of 18.1 million tons. Many traders said the data helped support, if not increase prices.

Mielke also said that soymeal and soybean prices may come under pressure as more soybeans are crushed in the March-August period.

"But soyoil prices will need to rise to finance a larger share of the crushing value. Soyoil's portion of the combined soymeal production is expected to appreciate to 50% or more from the current 42%," Mielke said.

In the cash market, palm olein for March was traded at $810/ton, and July/August/September at $800-$810/ton, said a Singapore-based broker.

Cash CPO for prompt shipment was offered MYR40 higher at MYR2,685/ton.

Open interest on the BMD was 80,556 lots Thursday, up from 80,375 lots Wednesday. One lot is equivalent to 25 tons.

A total of 16,754 lots of CPO were traded versus 9,242 lots Wednesday.

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

Month      Close    Previous   Change    High    Low
Mar 2010   2,680    2,644      Up 36     2,685   2,629
Apr 2010   2,681    2,643      Up 38     2,692   2,630
May 2010   2,674    2,635      Up 39     2,686   2,622
Jun 2010   2,662    2,620      Up 42     2,670   2,587

(END) Dow Jones Newswires

March 04, 2010 06:16 ET (11:16 GMT)