KUALA LUMPUR: Malaysian palm oil futures bounced on Wednesday as traders bet on demand shifting to the tropical oil as US soybean crop conditions deteriorate and tighten soyoil supplies.
Traders said the market was oversold the previous day on concerns about the worsening euro zone debt crisis that could stall global economic growth. Palm oil has lost 20 percent so far this year on debt crisis and market volatility.
"The pronounced declines yesterday were just a one day affair. Soyoil markets are pushing palm oil higher as its ample stocks are a contrast to tighter soyoil supply," said a trader with a foreign commodities brokerage.
By midday, benchmark November palm oil on the Bursa Malaysia Derivatives Exchange rose 1.2 percent to 3,020 ringgit ($1,013) per tonne. The previous day, the contract fell to 2,978 ringgit -- a level unseen since August 26.
Exchange volumes stood at 4,072 lots at 25 tonnes each versus the usual 12,500 lots with trading interest muted after last week's long holidays.
Palm oil exports for August were above the 1.6 million tonne mark, which could cut into ample stocks as production faltered last month with estate workers taking leave for the Muslim Eid festival.
September exports are expected to slip as importers like India and China wait for prices to come under pressure before committing to purchases, traders said.
Brent crude rose above $113 a barrel for the second consecutive day on Wednesday on expectations of lower US crude stockpiles after a storm disrupted production in the Gulf of Mexico.
Vegetable oil markets gained after the US Department of Agriculture's weekly crop progress report that showed just 56 percent of the soybean crop was rated good to excellent, down from 64 percent a year ago.
Copyright Reuters, 2011
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