Tuesday, March 9, 2010

Crude palm oil futures on Malaysia’s derivatives exchange ended lower Tuesday tracking weak crude oil futures, which fell below the psychological level of $80 a barrel during Asian trading hours, said trade participants.

Falling crude oil prices prompted many participants to ignore a bullish forecast by vegoil analyst Dorab Mistry, who said CPO prices may rise as high as MYR3,200 a metric ton this year.

The benchmark May contract on the Bursa Malaysia Derivatives ended MYR59 down at MYR2,650/ton.

By the end of trade on the BMD, April Brent crude on London's ICE Futures exchange were down $0.93 cents at $79.54 a barrel.

CPO prices fell in tandem despite bullish comments by Mistry, who said Malaysia's crude palm oil output will likely fall 2.3% to around 17.2 million tons this year due to El Nino-induced dry weather, which may prompt CPO prices to "scale new heights" from July.

"The most bullish period (for palm oil) will be the second half of 2010 to the first quarter of 2011," he said.

The shortage in supply may result in CPO prices scaling new heights "(after July) in the MYR2,800-MYR3,200/ton range," Mistry said.

He noted the dry spell may moderate CPO output in Indonesia, which may rise by only 1 million tons in 2010. Indonesia's government put the country's CPO output at 20.5 million tons last year.

Traders said Mistry's estimates were within market expectations, and therefore failed to boost prices.

Another analyst, Anne Frick, a senior oilseed analyst at Prudential Bache Commodities LLC, said CPO prices were likely to average MYR2,400-MYR3,300/ton in 2010, as supply isn't likely to outpace demand.

"Unless the analysts predicted prices would rise beyond MYR3,500, the estimates aren't too far off market expectations. Crude oil falling below $80 a barrel, however, is alarming, so the market reacted to that more than the bullish comments," said a Kuala Lumpur-based trader.

In the cash market, palm olein for March was offered at $830/ton.

Cash CPO for prompt shipment was offered MYR20 lower at MYR2,700/ton.

Open interest on the BMD was 81,504 lots Tuesday, up from 81,795 lots Monday. One lot is equivalent to 25 tons.

A total of 10,472 lots of CPO were traded versus 6,388 lots Monday.

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

Month      Close    Previous   Change    High    Low
Mar 2010 2,680 2,710 Down 30 2,710 2,680
Apr 2010 2,660 2,718 Down 58 2,721 2,660
May 2010 2,650 2,709 Down 59 2,715 2,650
Jun 2010 2,635 2,703 Down 68 2,700 2,635

(END) Dow Jones Newswires

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