Malaysian crude palm oil closed higher on last minute short-covering on Friday ahead of a long weekend holiday, reversing earlier losses caused by a stronger ringgit currency that has hurt refiner margins as demand slows. The ringgit has strengthened around 5 percent against the dollar in 2012, making it more expensive for refiners to buy ringgit-priced feedstock to process.
"The market pulled up a bit after the break, it seems to me most people are covering their shorts ahead of the long weekend," said a trader with a foreign commodities brokerage in Kuala Lumpur. Benchmark April palm oil futures on the Bursa Malaysia Derivatives Exchange ended up 1 percent to close at 3,085 ringgit ($1,025) per tonne. The futures market has lost 2.8 percent so far this year.
Traded volumes stood at 19,683 lots of 25 tonnes each, thinner than the usual 25,000 lots ahead of a long weekend holiday. The market was on the lookout for a possible announcement next week on Malaysia's crude palm oil quota that has been delayed since December, which hampered export licence holders' ability to supply overseas refiners with cheap feedstocks.
On the demand side, Malaysian palm oil exports for January eased close to 12 percent and 13 percent, according to cargo surveyors Intertek Testing Services and Societe Generale de Surveillance. In response to the tax structure, Malaysia will reform its crude palm oil export duty policy and introduce a 1 billion ringgit fund, a Malaysian daily reported on Friday, citing unidentified sources. Some traders see prospects of weaker demand for Malaysian palm oil as Brazilian soybean harvest will start soon and major consumers will start looking at these offers. The US soyoil contract for March delivery gained 0.5 percent in Asian trade while the most active September 2012 soyoil contract on China's Dalian Commodity exchange inched up 0.2 percent.
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