JAKARTA: Malaysian palm oil futures rose to a near one-month high on Tuesday, buoyed by export data and expectations of lower output, with additional support from optimism over a possible solution to the euro zone's debt problems.
Uncertainty about just how close European Union leaders will come to solving the euro zone debt crisis kept many markets trading in a tight range on Tuesday.
EU leaders are to meet on Wednesday with tentative plans in place for Greece's debt to be reduced, European banks to be recapitalised and the euro zone's EFSF rescue fund to be increased to provide partial insurance for sovereign bonds.
"Pretty strong, it is holding pretty well," said a Kuala Lumpur-based palm trader. "It is because of the external crisis, with people talking about the euro zone stabilizing."
Benchmark January palm oil futures on the Bursa Malaysia Derivatives Exchange ended 2.1 percent higher at 2,951 Malaysian ringgit ($941) a tonne, their highest since Sept. 26.
Traded volumes for the January palm contract stood at 14,264 lots of 25 tonnes each, compared with 12,213 lots on Monday.
A slowdown in Europe, the second-largest palm consuming region after Asia, could weaken demand, although palm oil could maintain its market share in the region as it is the cheapest edible oil.
"We remain bullish on the demand for edible oil in food usage in view of the rising income levels and population growth in China, India and Indonesia," CIMB analysts said in a note.
"However, if the growth of the developed economies slows, it may dent the growth of Asian economies, slowing the increase in the income levels of the low- to medium-income groups. This could curb the demand growth prospects for edible oils."
At a time when palm oil is entering a lower production cycle in the final quarter, demand appears robust.
On the data front, cargo surveyors Intertek Testing Services said exports of Malaysian palm oil products for Oct. 1-25 rose 16.4 percent, while Societe Generale de Surveillance cited a 13.5 percent climb.
"Export data was OK," added the trader. "Demand is pretty firm ... we are going to move into the monsoon season."
In comparative markets, US soyoil for December delivery gained in Asian trade, while China's most active May 2012 soybean oil contract also inched higher.
Brent was steady above $111 on Tuesday as looming concern over Europe's economic health kept prices in check, while US oil rose for a third straight day, boosted by improved company earnings.
"Sentiment has changed," said a Jakarta-based palm trader. "There is a lower (production) season coming and demand is not bad."
Copyright Reuters, 2011
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