Friday, July 16, 2010

Crude Palm Oil Ends Up 2.4%; Higher Exports, Supply Worries

Crude palm oil futures on Malaysia’s derivatives exchange ended up for the sixth trading session Thursday, partly on the back of higher exports and talk of weaker growth in July palm oil production.

Palm prices powered higher towards the end of trade on the Bursa Malaysia Derivatives exchange as momentum for the rally seemed to be building tracking reports of higher demand from Pakistan in preparation for Ramadan, the Islamic month of fasting, trade participants said.

The benchmark September contract on the BMD rose as much as 2.7% to a five-week high of MYR2,445 a metric ton before ending MYR58 or 2.4% higher at MYR2,439/ton. The September contract expires today.

Pakistan, the third-largest buyer of palm oil after India and China, has bought up to 225,000 tons of palm oil in July amid rising demand.

Demand from the country may extend to August, said Rasheed Janmohammad, vice-chairman of the Pakistan Edible Oil Refiners Association.

The South Asian nation usually purchases 80,000-125,000 tons a month on average.

Cargo surveyor SGS (Malaysia) Bhd. said Pakistan imported 140,696 tons in the first 15 days of July.

“We expect August to be a heavy buying month as well, with palm oil imports likely to reach 150,000 tons,” Janmohammad told Dow Jones Newswires.

Only 20%-30% of the country’s requirements have been purchased so far for August, he added.

Earlier this month trade participants and analysts said they expected July output to rise 10% on month on a seasonal uptick in supply, but a possible supply shortfall due to lower yields in the states of Sabah and Sarawak led them to revise the growth forecast to 5%.

The Malaysian Palm Oil Board put June output at 1.42 million tons, up 2.5% on month.

Growers also said the recent heavy rainfall in several oil palm growing regions may boost future production prospects, but it has hurt palm oil extraction rates from fresh fruit bunches, slowing growth in production.

Palm prices had been under pressure in the past few months ahead of a seasonal supply increase during the July-September quarter, but rising festive demand from the Indian subcontinent and the Middle East may lead to a drawdown in palm inventories, boosting prices.

Export figures by cargo surveyors were better than market expectations of a 10%-11% rise, supporting the rally in prices.

Cargo surveyor Intertek Agri Services estimated exports in the first 15 days of July at 668,573 tons, up 11% on month, while another surveyor, SGS (Malaysia) Bhd., put the figure at 708,384 tons.

In the cash market, palm olein for October/November/December shipment was traded at $770/ton and $772.50/ton, September at $780/ton free on board Malaysian ports, a Singapore-based trading executive said.

Cash CPO for prompt delivery was offered MYR10 higher at MYR2,470/ton.

CME Group Inc.’s dollar-based CPO futures for the September contract was up $37.50 from the U.S. Monday close at $707.25, with three lots done.

The rupiah-denominated October CPO futures on the Indonesia Commodity and Derivative Exchange was trading 0.9% higher at IDR6,435 a kilogram at 0924 GMT, with 92 lots changing hands. One lot equals 10 tons.

Open interest on the BMD was 71,380 lots, versus 72,521 lots Wednesday. One lot is equivalent to 25 tons.

A total of 30,313 lots of CPO were traded versus 10,680 lots Wednesday.

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

Month   Close  Previous  Change   High    Low
Jul'10  2,465     2,460  Up  05  2,472  2,453
Aug'10  2,459     2,423  Up  36  2,473  2,428
Sep'10  2,439     2,381  Up  58  2,445  2,378
Oct'10  2,411     2,363  Up  48  2,418  2,353 

-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233;

(END) Dow Jones Newswires

July 15, 2010 07:17 ET (11:17 GMT)

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

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