Malaysian palm oil futures closed up 1.65 percent on Tuesday on short-covering, but came off the day's high on a late sell-off as sentiment remained weak on demand concerns, some traders said. Gains for crude oil, a substitute for palm oil in biofuels, as well as a recovery in Chicago grains and oilseeds futures helped lift prices.
The benchmark December contract on the Bursa Malaysia Derivatives exchange closed up 30 ringgit, at 1,850 ringgit a tonne, off a high of 1,893 ringgit, after slumping by 9 percent the previous day. Contracts of other traded months were mixed, with some rising between 1 ringgit and 37 ringgit. Overall volumes stood at 19,393 lots of 25 tonnes each.
"I think as long as our fundamentals here are not showing demand pull, whatever recovery in palm futures there is won't remain for long," said a trader with a Malaysian brokerage firm. Oil dropped more than 6 percent to below $88 a barrel on Monday as a global financial market rout added to concerns that faltering fuel demand could slow further, before recovering some of the losses on Tuesday.
Crude was up $2.49 at $90.30 a barrel in Asian trade at 1040 GMT. Chicago Board of Trade soybeans fell the trading limit of 70 cents, or 7 percent, to $9.22, on Monday, the lowest since September 13, 2007, but have recovered some the lost ground.
Fears of a build-up in palm oil stocks amid weak demand may maintain pressure on palm prices near term, another trader said. Malaysia's September palm oil stocks are likely to climb 9.3 percent from a month earlier as output is expected to hit its highest level this year amid a pronounced slowdown in exports, a Reuters poll showed on Tuesday.
The Malaysian Palm Oil Board is due to release September's palm oil stocks, production and exports data on Friday. "I would say there is some downside potential but not really that much anymore assuming soybean oil prices do not continue to drop," an analyst at a brokerage in Singapore said.
In the physical market, Malaysian palm oil for October and November delivery stood at 1,900/1,920 ringgit a tonne in both the southern and central regions. Trades were done at 1,880-1,910 ringgit a tonne for October delivery and at 1,900 ringgit a tonne for November delivery, in the southern region.
INDONESIAN PALM MIXED: Prices were mixed in Indonesian palm oil markets, with prices in Medan falling sharply when producers resumed trading activities after the Eid al-Fitr break. Producers in Medan, North Sumatra - home to Belawan port, Indonesia's key port for palm oil exports - sold crude palm oil at 4,895-4,950 rupiah. Before the holidays, producers offered palm oil at 6,200 rupiah per kg.
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