Palm oil up 1.6 percent after Fed move

JAKARTA: Malaysian palm oil futures rebounded on Wednesday, after four straight sessions of losses, tracking other commodities higher as cautious investors said the market was oversold on growth and debt worries.

Oil led a rebound among commodities as investors went bargain hunting for riskier assets after the US Federal Reserve promised to extend near-zero interest rates for two more years.

The benchmark October crude palm oil contract on Bursa Malaysia Derivatives traded 1.6 percent higher at 2,967 Malaysian ringgit ($980) a tonne after earlier hitting a peak at 2,977 ringgit.

Traded volumes for the contract were 5,067 lots of 25 tonnes each, compared to 18,854 lots on Tuesday.

"Yesterday was down and oversold, while other markets have also rebounded back," said an Indonesia-based trader. "People still need to eat ... and palm oil is still the cheapest (vegetable oil)."

Asian stocks rebounded, following a jump in US shares, after the US Federal Reserve move, stemming a global equity rout for the time being.

On Tuesday, benchmark prices touched 2,917 ringgit, a level unseen since late-October last year.

Like many other commodity markets, palm oil has been weighed down this week by concerns that a global economic slowdown were imminent after the US credit downgrade pressured financial markets.

"Palm is following a strong rebound from the Dow Jones Index, also some kind of correction after the sharp plunge of the last few days," said a Kula Lumpur-based trader. "Some short cover ahead of MPOB data as well."

On the data front, cargo surveyor Intertek Testing Services said exports of Malaysian palm oil products for Aug 1-10 rose 48 percent to 592,538 tonnes from 400,316 tonnes shipped during July 1-10.

After the palm market closed for lunch, industry regulator Malaysian Palm Oil Board said Malaysia's July palm oil stocks fell 2.8 percent to 1,996,317 tonnes from a revised 2,053,382 tonnes in June.

Malaysia is the world's second biggest palm oil producer, after Indonesia.

Workers in both countries, which produce more than 90 percent of global supplies, are expected to take a long break during the key Islamic festival of Eid Al-Fitr in early August, which will cut palm oil output and lift prices.

In comparative markets, Chicago Board of Trade actively traded November soy rose, while the most active May 2012 soyoil on Dalian Commodity Exchange also gained.

Copyright Reuters, 2011