Palm oil bounces as investors hunt for bargains

KUALA LUMPUR: Malaysian palm oil futures bounced up on Tuesday as bargain hunters resurfaced after the market slid to a one-year low the previous day on concerns that developed countries were pushing the world into a recession.

Palm oil led other vegetable oil prices higher, helped by a belief that markets were oversold, a weaker US dollar that makes edible oil exports competitive and recovering shipments owing to robust Asian festival demand.

"Sentiment is still poor but agriculture commodities like palm oil have the potential to weather the financial storm as the fundamentals are supportive," said a trader with a foreign commodities brokerage in Kuala Lumpur.

Benchmark December palm oil futures on the Bursa Malaysia Derivatives Exchange settled up 1.5 percent to 2,948 ringgit ($926.72) a tonne.

The previous day, the contract dropped as much as 4.5 percent, its worst daily showing since February this year.

Overall trade stood at 23,487 lots of 25 tonnes each, compared to the usual 25,000 lots.

Reuters analyst Wang Tao, however, saw palm oil futures revisiting the previous trading session's low of 2,857 ringgit -- last seen on Oct. 8 2010 -- based on a channel technique.

Traders said there were scattered reports of palm oil export contracts getting cancelled by Chinese importers due to the previous day's rout, although these were for small cargoes.

The market, which has lost 23 percent so far this year, is counting on demand from developing nations such as India and China to support prices.

Both Asian countries are the world's largest edible oil buyers with festivals and public holidays due in October. Malaysian exports show this recovery in demand.

Malaysian exports for Sept. 1-25 fell 11.9 percent from the same period a month ago, cargo surveyor Intertek Testing Services said, flagging a recovery from the first ten days of this month when the decline stood at 36.4 percent.

Another cargo surveyor, Societe Generale de Surveillance, said Malaysian exports for Sept. 1-25 fell 11.8 percent.

Oil rose on Tuesday, with Brent crude up by more than $2 to exceed $106 a barrel, as fresh measures discussed by the European Central Bank (ECB) curbed anxiety about European debt.

Strength in crude oil also supported other vegetable oil markets that are channeled into the biodiesel sector. US soyoil for Oct delivery rose 0.8 percent in Asian trade.

The most active May 2012 soybean oil contract on China's Dalian Exchange climbed 0.7 percent.

Copyright Reuters, 2011