DJ Asian Crude Palm Oil Ends Up 0.6% On Short Covering, Crude

KUALA LUMPUR (Dow Jones)--Crude palm oil futures on Malaysia's derivatives exchange ended higher Tuesday with the rise in crude oil prices and bullish local fundamentals prompting investors to cover shorts, trade participants said.

The benchmark September contract on the Bursa Malaysia Derivatives exchange ended MYR13 or 0.6% higher at MYR2,353 a metric ton after moving in a MYR2,325-MYR2,354 range.

Export shipments are gaining momentum and this may support the market, said a Kuala Lumpur-based executive at an international trading company.

Cargo surveyor Intertek Agri Services estimated Malaysia's palm oil exports during the July 1-10 period rose 9% to 474,928 tons, while another surveyor put exports in the same period at 460,343 tons.

Many among trade participants said selling pressure over the past few weeks and lower palm inventory levels have reduced the downside potential for prices for now, with strong support for prices around MYR2,280-MYR2,300/ton.

But if soyoil futures continue to decline later on the CBOT, it will have a spillover impact on palm oil, said a Kuala Lumpur-based analyst.

December soyoil was trading 12 points lower at 38.24 cents a pound by the end of trade on the BMD.

Short-term forecasts by analysts point to lower palm oil prices over the next few months despite a bullish crop report by the Malaysian Palm Oil Board as production is expected to recover and may rise to a peak in the
September-November period.

"We believe the shortfall in palm production could be a reflection of the general shortage of foreign workers in Malaysia, which resulted in lower-than-expected yields. Output should recover seasonally in the next few
months," Tan Ting Min, an analyst at Credit Suisse Malaysia, said.

Despite the weak growth in June production, a double-digit rise in output this month would probably mean inventory levels may reach higher levels at end-July, analysts and plantation company executives said.

In the cash market, palm olein for September shipment was traded at $765/ton, and for October/November/December at $757.50/ton, free on board Malaysian ports, said a Singapore-based trading executive.

Cash CPO for prompt delivery was offered MYR10 lower at MYR2,430/ton.

CME Group Inc.'s dollar-based CPO futures contract and the rupiah-denominated September CPO futures on the Indonesia Commodity and Derivative Exchange weren't traded during Asian hours.

Open interest on the BMD was 72,201 lots, versus 73,512 lots Monday. One lot is equivalent to 25 tons.

A total of 12,376 lots of CPO were traded versus 15,227 lots Monday.

Closing BMD CPO futures prices in MYR/ton at 1000 GMT: 
 
Month   Close  Previous  Change   High    Low 
Jul'10  2,450     2,440  Up  10  2,450  2,438 
Aug'10  2,395     2,384  Up  11  2,398  2,375 
Sep'10  2,353     2,340  Up  13  2,353  2,325 
Oct'10  2,335     2,321  Up  14  2,335  2,310 
 
 
  -By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233;
shie-lynn.lim@dowjones.com