Malaysian palm oil futures recovered previous losses to gain on Wednesday as it rose nearly 1 percent on traders' forecasts that end-of-month stockpiles will draw down further during February. The palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange rose 0.97 percent to close at 2,613 ringgit ($620.30) per tonne in the evening, the first increase after two sessions of losses.
Traded volume stood at 49,612 lots of 25 tonnes each. "The market will hold," said a trader with a Kuala Lumpur-based brokerage. "People are willing to buy at 2,500 with the belief that end-stocks will draw down on low production for the month of February," the trader explained.
Inventories of the tropical oil have declined since November because of a seasonal decline in production and because of dry weather from the El Nino weather phenomenon that typically brings scorching heat to Southeast Asia, lowering palm yields. Malaysia's January end-stocks, or end-of-month inventories, fell 12.4 percent month-on-month to 2.31 million tonnes, its lowest in six months, as output took a hit from the dry weather impact.
Palm oil may retrace to 2,549 ringgit per tonne as it approached a support at 2,576 ringgit again, said Wang Tao, Reuters market analyst for commodities and energy technicals. In competing vegetable oil markets, the May soybean oil contract on the Dalian Commodity Exchange fell 1 percent, while the Chicago soyoil contract gained 0.1 percent.
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