Palm oil up as Greece passes unpopular austerity bill

Monday, 13 February 2012 11:02

SINGAPORE: Malaysian crude palm oil futures gained on Monday after Greece passed an unpopular austerity bill, inching closer to securing a bailout deal that could help avoid a messy default.

The Greek parliament approved on Monday the deeply unpopular austerity bill, injecting some much-needed optimism into the market and helping to lift the palm oil market that has lost 0.6 percent so far this year.

But market players were also concerned about prospects of slowing demand for palm oil especially as the tropical oil enters a period of recovering production.

"Traders are watchful of the weakness in the cash crude palm oil prices that could morph into a broader relapse given the fact that we are approaching higher production month," said a trader with a local commodities brokerage in Kuala Lumpur.

"Demand remains anaemic and cash prices are waning," added the trader.

By the midday break, benchmark April palm oil futures on the Bursa Malaysia Derivatives Exchange gained 0.5 percent to 3,156 ringgit ($1,044) per tonne. Traded volumes were thin at 8,104 lots of 25 tonnes each, compared to the usual 12,500 lots.

Reuters market analyst Wang Tao posted a bullish view, saying palm oil is poised to break a resistance at 3,165 ringgit per tonnes and rise further into a range of 3,190-3,196 ringgit.

On the demand side, cargo surveyor Intertek Testing Services said Malaysian palm oil exports from Feb. 1 to 10 fell 7.7 percent to 342,982 tonnes from a month ago while another cargo surveyor Societe Generale de Surveillance reported a smaller decline of 4.3 percent to 337,618 tonnes.

Some traders attributed the decline in exports to the shift in orders to top producer Indonesia which is selling at a discount due to its tax structure.

But the market expects crude palm oil exports to pick up in coming week after Malaysia issued its tax-free export quotas of 3 million tonnes.