Malaysian palm oil jumps

Malaysian palm oil futures hit a one-week peak before paring gains late on Thursday, as potential import tariff cuts in top consumer China offset falling crude prices weighed by a possible peace plan in Libya. China will cut tariffs and red tape to boost imports this year and "maintain balanced trade," Zhong Shan, the country's vice minister of commerce said in comments published on Thursday, but did not disclose details.
The benchmark May 2011 crude palm oil contract on Bursa Malaysia Derivatives added 0.3 percent to 3,600 Malaysian ringgit ($1,185) a tonne. Earlier, prices rose to a high of 3,648 ringgit - a level not seen since Feb. 22. The most-active Sept 2011 soyoil on the Dalian Commodity Exchange traded at 10,308 yuan versus an open at 10,366 yuan. "China import duty cuts are big news and palm oil is getting some support," said a trader in Singapore. "The news underlines the general story of strong Chinese demand. But if there is only an import tax cut on soyoil, we will see a sell down in palm oil. If it's palm oil that gets an import tax cut, we will see the market fly up at least 100 points," the trader said.
A bullish target at 3,702 ringgit per tonne remains intact for Malaysian palm oil based on its wave pattern and a Fibonacci projection analysis, according to Thomson Reuters analyst Wang Tao. Overall, traded volume stood at 16,012 lots of 25 tonnes each, compared with a one-week high of 21,861 lots on Wednesday. Global palm oil production stands at about 45 million tonnes per year, with China buying around 7 million tonnes. India is also a major buyer.
Analysts say these import figures are only likely to rise, as urbanisation and populations grow in both countries. ICDX's May CPO futures contract was at 10,450 rupiah ($1.186) per kg, compared to 10,360 rupiah per kg when it opened. Market volume was 1,966 lots of 10 tonnes each. On Wednesday, benchmark palm oil prices climbed more than 2 percent as investors eyed growing demand for biodiesel after tension in the Middle East boosted crude oil.
Oil prices slipped on Thursday, dropping by more than $3 briefly before recovering, after the Arab League said a peace plan for Libya was under consideration. Although less likely to be channelled into biofuels due to a lack of government subsidies, mandates in Brazil and the United States may see more soyoil taken up, which could create a vacuum for palm oil in the food sector.