Malaysian palm oil rebounds

Malaysian palm oil bounced from one-month lows hit earlier on Tuesday, as persistent worries that demand will outstrip supplies, buoyed prices. The benchmark April 2011 crude palm oil contract on Bursa Malaysia Derivatives ended up 0.6 percent at 3,670 Malaysian ringgit ($1,200) a tonne, after going as low as 3,610 ringgit a tonne earlier.
Overall, traded volume stood at 11,293 lots of 25 tonnes each, compared with a total of 10,525 lots on Monday. "The weather is supporting the market, followed by good 15-day export numbers," said one Malaysian trader. "(But) the market is range-bound." On Saturday, exports of Malaysian palm oil products for January 1-15 rose 3.68 percent to 589,010 tonnes from 568,127 tonnes shipped during December 1-15.
Some market participants had expected a negative number. The overriding factor for palm oil price direction, remains concerns that heavy rains may have curbed Malaysian and Indonesian output. Both countries contribute more than 90 percent of the world's palm oil output. On January 4, prices touched 3,905 ringgit, a peak not seen since March 2008, triggering a slowdown in near-term demand from top buyers India and China.
"The fundamentals are quite positive with production down, but the demand is not happening yet," said one Indonesian palm oil trader. "There is no fresh interest from destinations, which has sent prices down the last couple of days. "China has fulfilled its requirements for the Chinese New Year and India is nowhere to be seen."
Also on the radar, Indonesia, the world's largest palm oil producer, is likely to raise export taxes to 25 percent in February, from 20 percent now, to help channel already tight supplies for the domestic cooking oil industry. "Indonesian tax will be 25 percent for sure," the same Indonesian trader. "People are trying to scramble oil out to Malaysia. They see the 25 percent as something that may hurt them, so they are trying to sell January shipments lower."
April crude palm oil futures contract on the Indonesia Commodity & Derivative Exchange was at 10,770 rupiah per kg, compared to 10,610 rupiah per kg when it opened. Market volume was 1,705 lots of 10 tonnes each. Comparative vegetable oil supplies also remain a focus, as dry weather has hit major soyaoil exporter Argentina.
Some rains over the weekend in Argentina and news that China cancelled one or two cargoes of imported soya weighed on US soyaoil futures. Soyaoil for March delivery dropped 0.2 percent on Tuesday after the long weekend holiday. The most-active September 2011 soyaoil on the Dalian Commodity Exchange, earlier hit a three week low at 10,362 yuan but was last at 10,470 versus an open at 10,478 yuan.
Possibly highlighting the tight supply outlook, Thailand delayed a plan to introduce a palm-oil-blended fuel, B5, for all diesel engine cars to the middle of the year due to a palm oil shortage, the energy minister said on Tuesday. In related markets, Brent crude futures edged higher on after Opec members signalled the group would maintain production levels even as prices flirt with $100 a barrel, while the resumption of shipments through the Trans-Alaska Pipeline capped price gains.