Wednesday, March 17, 2010

Crude Palm Oil Ends Up On Higher Soyoil, Crude

Crude palm oil futures on Malaysia’s derivatives exchange ended higher Wednesday tracking positive crude oil and soyoil futures in after-hours trade.

However, a lack of fresh local cues prevented CPO prices from breaking the MYR2,600 resistance, prompting sluggish, rangebound trade.

The benchmark June contract on Bursa Malaysia Derivatives ended MYR26 higher at MYR2,595 a metric ton, after trading in a MYR2,576-MYR2,600 range.

Higher soyoil futures in the morning prompted CPO prices to rise to MYR2,600 but the market's inability to break that resistance level prompted sluggish trade for the rest of the day, said traders.

"CPO prices barely moved today and there were hardly any trades on the cash market," said a Kuala Lumpur-based trader.

By the end of trade on the BMD, May soyoil on the electronic Chicago Board of Trade was up 20 points at 39.57 cents a pound.

May Brent crude on London's ICE Futures exchange was up $0.77 at $81.30 a barrel.

Foremost on many participants' minds were fears that palm oil's discount to rival soyoil is diminishing, and this prevented CPO prices from breaking out of rangebound trade.

Palm oil used to average $70-$100/ton less than soyoil, and around such levels it was seen as a cheap alternative to soyoil, said another Kuala Lumpur-based trader.

However, the trader added the discount has since fallen to $10/ton, with fears that palm oil may soon outstrip soyoil.

"That's making it hard for CPO prices to rise, as the market fears higher CPO prices would result in importers switching to soyoil," said the trader.

The trader added India would be the market most likely to switch to soyoil should the discount fall even lower.

India is one of Malaysia's largest buyers of CPO.

In the cash market, palm olein for July/August/September traded at $805/ton, an executive from a Singapore-based commodities brokerage said.

Cash CPO for prompt shipment was offered MYR25 higher at MYR2,630/ton.

Open interest on the BMD was 84,059 lots Wednesday, up from 82,648 lots Tuesday. One lot is equivalent to 25 tons.

A total of 15,515 lots of CPO were traded versus 20,774 lots Tuesday.

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

Month Close Previous Change High Low
Apr 2010 2,624 2,605 Up 19 2,627 2,611
May 2010 2,605 2,586 Up 19 2,612 2,590
Jun 2010 2,595 2,569 Up 26 2,600 2,576
Jul 2010 2,583 2,553 Up 30 2,590 2,573

-By Fawziah Selamat, Dow Jones Newswires; +62 21 3983 1277;

(END) Dow Jones Newswires

March 17, 2010 06:50 ET (10:50 GMT)

Copyright (c) 2010 Dow Jones & Company, Inc.

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