Palm oil tracks rivals higher; export tax, ringgit could cap gains

Malaysian palm oil futures rose on Friday, charting a third session of gains this week and tracking competing vegetable oils. Gains could be capped by a stronger ringgit and as an export tax on crude palm oil (CPO) starts in April, traders said. The palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange gained 0.8 percent to reach 2,748 ringgit ($707) per tonne in evening trade. Volumes were 41,031 lots of 25 tonnes each versus a 2015 daily average of 44,600 lots.
"Dalian and the Chicago Board of Trade is strong so our market is up, but it could come under pressure because of the ringgit," said a Kuala Lumpur-based trader. "The market views the ringgit strength as a bearish factor for exports, coupled with (CPO export) taxes for April. We'll have lots of fluctuations these few sessions." The ringgit hit 3.8820 against the dollar on Friday, its strongest in seven months, as the Federal Reserve raised doubts about US rate hikes this year. It gained 0.3 percent on Friday evening to trade around 3.8890.
Malaysian crude palm oil shipments are expected to take a hit this month, said the trader, as the government raised its export tax to 5 percent in April and ending a duty-free policy held since May 2015. Palm oil shipments for March 1-31 surged 22-24 percent from a month earlier, data released by cargo surveyors showed on Thursday, boosted by demand from India. Technical charts show palm oil could gain support at 2,716 ringgit, as it failed to break a resistance at 2,776 ringgit, according to Reuters market analyst for commodities and technicals Wang Tao.
In competing vegetable oil markets, the May Chicago Board of Trade soyoil contract rose 0.8 percent, while the September soybean oil contract on the Dalian Commodity Exchange was up 2.7 percent. The offer price for crude palm kernel oil rose to 5439.88 ringgit per tonne on Friday evening, gaining after two days of falls this week on tight supplies, according to price assessments by Thomson Reuters.