Wednesday, March 10, 2010

Crude Palm Oil Ends Up On Record Low End-Month Stocks

Crude palm oil futures on Malaysia’s derivatives exchange ended higher Wednesday as record low end-month stock levels and falling production prompted buying activity, said trade participants.

The benchmark May contract on Bursa Malaysia Derivatives ended MYR35 up at MYR2,685 a metric ton, after trading in a MYR2,654-MYR2,719 range.

Malaysia's CPO output in February fell 12.5% from the previous month to 1.16 million metric tons, said the Malaysian Palm Oil Board.

Palm oil inventories totaled 1.79 million tons at the end of February, down 11% from 2.0 million tons in January.

Stocks fell more than expected to the lowest level since September 2009.

In its monthly report, MPOB said CPO exports fell 12% to 1.29 million tons in February. The country exported 1.46 million tons in January.

Estimates for Malaysia's March 1-10 palm oil exports were also released today.

Cargo surveyor Intertek Agri Services estimated exports at 464,889 tons, a rise of 25% on month.

Another cargo surveyor, SGS (Malaysia) Bhd., estimated exports rose 5.8% on month to 434,340 tons.

The estimates were either within or below market expectations of an increase of 25% or 460,000 tons, said traders.

In other news, analysts continued to release bullish forecasts for CPO prices on the last day of a palm oil conference. The forecasts were nevertheless tempered by fears that soyoil production may be on the rise.

Palm oil's discount to soyoil will likely narrow further and it could even trade at a slight premium soon, Thomas Mielke, editor-in-chief at Oilworld, said at the industry conference.

A record soybean harvest this year may have some damping effect on soyoil prices as palm oil prices strengthen tracking bullish supply fundamentals, he added.

Mielke told Dow Jones Newswires earlier that CPO output in Malaysia may rise only slightly to 17.8 million tons in 2010, from 17.6 million tons last year.

CPO prices may rise to around MYR2,900/ton if output in Malaysia eases further, Mielke said, without giving a timeframe.

James Fry, another analyst, said at the conference CPO prices could fall below MYR2,500 if the benchmark ICE Brent crude oil contract drops to $70 a barrel.

Palm oil may trade between MYR2,600 and MYR2,700 from March to September if Brent trades between $76 and $79, he added.

Traders said the forecasts, while bullish, were cautious and came within market expectations.

"It's good that the analysts didn't go overboard and predict shocking CPO prices reaching MYR4,000 levels. In previous years, such overly bullish forecasts only served to shock the market, resulting in volatile trading," said a Kuala Lumpur-based trader.

In the cash market, palm olein for March was offered at $840/ton.

Cash CPO for prompt shipment was offered MYR20 higher at MYR2,720/ton.

Open interest on the BMD was 82,217 lots Wednesday, up from 81,504 lots Tuesday. One lot is equivalent to 25 tons.

A total of 11,722 lots of CPO were traded versus 10,472 lots Tuesday.

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

Month Close Previous Change High Low
Mar 2010 2,729 2,680 Up 49 2,729 2,690
Apr 2010 2,709 2,660 Up 49 2,729 2,663
May 2010 2,685 2,650 Up 35 2,719 2,654
Jun 2010 2,670 2,635 Up 35 2,700 2,640

(END) Dow Jones Newswires

March 10, 2010 06:11 ET (11:11 GMT)

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