KUALA LUMPUR: Malaysian palm oil futures rose to a one-week high on Friday, taking cues from US commodity markets in the previous session, although gains were limited by weak demand and top producer and competitor Indonesia cutting export taxes.
Palm oil is set for its best weekly gain since early March as some traders say the market has been oversold, but other investors expect prices to fall further on a build-up in stocks as production outpaces lagging exports.
Indonesia is to cut its export tax on crude palm oil in May to 17.5 percent from 22.5 percent this month as international prices have consistently fallen, a move that may shift orders away from Malaysia.
"Palm oil is staying up only because of external markets. The local fundamentals are very bearish but some in the market are of the view that there is an export recovery coming into play," said a trader with a foreign commodities brokerage.
Benchmark July crude palm oil contract on Bursa Malaysia Derivatives Exchange rose to as much as 3,351 ringgit ($1,114) a tonne, a level unseen since April 14, before dropping back to 3,342 ringgit at midday.
Trading volumes were light, with 5,352 lots of 25 tonnes each, compared to the usual 12,500 lots, as it was a market holiday in the US and also in Indonesia for Good Friday and as refiners fretted over the strong ringgit currency.
The ringgit hit a 14-year high on Thursday, which makes Malaysian crude palm oil priced in the currency more expensive to process.
Refiners are buying less palm oil as export demand has been low. Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance will issue April 1-25 Malaysian palm oil exports on Monday and some traders expect the declines to narrow.
Palm oil gained support from strong increases in US crude oil and Chicago soyoil on Thursday.
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