Palm oil gains on data, short-term output outlook

JAKARTA: Malaysian palm oil rose for a fifth straight session on Tuesday, supported by well-received data and expectations of lower output, with gains capped by ongoing macro uncertainty.

The benchmark October contract on the Bursa Malaysia Derivatives Exchange traded 0.3 percent higher at 3,044 Malaysian ringgit ($1,020) per tonne. Earlier, prices touched 3,045 ringgit, to flirt with near-two week highs.

Traded volumes for the contract were 3,895 lots of 25 tonnes each, compared to 9,786 lots on Monday.

"The reason for the strength, aside from stocks markets, is the USDA report that they are expecting worse than expected soybean harvests," said a Singapore-based analyst. "Temporarily it should be supported but at the end of September, there should be some downside, on the back of peak harvesting season.

"In August, production should come down because of the fasting season, so we could see inventories stable at current levels before September."

He added that weaker currency markets were also helping sentiment.

Last week, the U.S Agriculture Department lowered its soy output estimate for soybeans, below the lowest trade guess.

Following on from that, on Monday exports of Malaysian palm oil products for Aug. 1-15 rose 27 percent to 953,852 tonnes from 752,047 tonnes shipped during July 1-15, cargo surveyor Intertek Testing Services said.

Indonesia outpaced Malaysia to become the top palm oil producer in 2007.

A bullish target at 3,144 ringgit has been established for Malaysian palm oil as it has cleared resistance at 3,057 ringgit per tonne, Wang Tao, a Reuters market analyst said.

In other vegetable oils, US soybeans for November delivery dipped, while the most active May 2012 soyoil on China's Dalian Commodity Exchange also fell.

"China's soyoil market has stabilized after last week's fall," said an oil analyst with local brokerage in Shanghai. "But trade remains choppy as investors sell on worries that the demand of soybean could slow down at a time when China increased soybean imports and edible oil prices lately.

"Traders are waiting for new leads to set market directions, it might fall further if US markets stayed weak."

Also capping palm oil gains, Brent crude futures edged down, after rising nearly $2 a day earlier, as soft US economic data renewed fears of weaker oil demand from the world's top oil consumer and a rebound in the dollar spurred selling.

Manufacturing in the New York area contracted for the third straight month in August, data showed on Monday, tempering any lingering hopes for a rebound in the second half of the year.

Like other commodity markets, palm sentiment has very much being driven by the global macro outlook in recent sessions, with benchmark palm oil prices falling below the psychological 3,000 ringgit level last week.

Copyright Reuters, 2011