Palm oil hits near 3-week high as Greece passes bill

Monday, 13 February 2012 16:35

SINGAPORE: Malaysian crude palm oil futures rose to near three-week high on Monday after Greece passed an unpopular austerity bill 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 financial markets, including palm oil that has lost 0.2 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 approching 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.

Benchmark April palm oil futures on the Bursa Malaysia Derivatives Exchange were up 1.2 percent to close at 3,168 ringgit ($1,048) per tonne. Prices earlier hit an intraday high of 3,171 ringgit, a level last seen since January 25.

Traded volumes stood at 22,750 lots of 25 tonnes each, slightly thinner than the usual 25,000 lots.

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.

Brent crude prices rose more than $1 to $118.38 on Monday, supported by a weaker dollar and expectations of a revival in demand growth, after Greece approved an austerity bill to secure a second bailout.

Other vegetable oil markets were also lifted by the Greek news as the US soyoil contract for March delivery gained 0.7 percent in Asian trade.