KUALA LUMPUR: Malaysian palm oil futures rebounded on Wednesday on a positive technical outlook with support coming from crude oil markets as growing civil unrest in Yemen heightened concerns of supply disruptions.
Palm oil, which can be used as a biofuel that competes with crude oil, snapped two days of declines although expectations of strong production this month has weighed on prices.
"Crude oil is one of the supportive factors for palm oil prices, but it just a temporary reaction. It might not have strong influence on broader commodities," said a trader with foreign brokerage in Kuala Lumpur.
By midday, the benchmark June crude palm oil contract rose 0.8 percent to 3,333 ringgit ($1,100) per tonne. The previous day, the contract tumbled 3.7 percent on strong output prospects and a firm Malaysian ringgit currency.
Overall traded volume rose to 9,366 lots of 25 tonnes each from the usual 7,500 lots.
A Reuters technical analysis showed Malaysian palm oil is likely to rebound to 3,450 ringgit per tonne, as it refused to drop further after touching a strong support at 3,309 ringgit.
"Fundamentally our market is bearish as Malaysian Palm Oil Association reported production in the first half of this month could rose 16 percent," said another trader in Kuala Lumpur.
"Market has no way to go up," he added.
Output in Malaysia's key southern growing region, which accounts for 30 percent of national output, is set to strengthen in March on favourable growing weather.
Higher crude oil gave some support to markets.
Chicago soyoil for May delivery fell 0.2 percent as investors remained cautious ahead of the US Department of Agriculture's planting report due on March 31.
The most active Sept. soyoil contract on China's Dalian Commodity Exchange rose almost 1 percent.
Hamburg-based oilseeds analysts Oil World on Tuesday said global Sept. 2010/Feb. 2011 exports of soyoil are estimated to have surged 34 percent on the year to a 3-year-high of 5.1 million tonnes as business was won from palm oil.
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