KUALA LUMPUR: Malaysian palm oil futures ended lower on Wednesday as an industry survey indicated improving production this month, although bullish sentiment over demand and tight supply capped further losses.
The benchmark palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange lost 37 ringgit, or 0.68%, to 5,437 ringgit ($1,299.63) a tonne at close.
Production in the world’s second-largest producer during the first half of February is estimated to have risen 0.46% month-on-month, traders said, quoting data from the Southern Peninsula Palm Oil Millers’ Association (SPPOMA).
Adding pressure was Malaysia keeping its March export tax for crude palm oil at 8% but raising its reference price to 5,277.58 ringgit ($1,261.52) from 4,907.14 ringgit in February.
The fundamentals surrounding palm is bullish on better-than-expected exports and the move by Indonesia in implementing the Domestic Market Obligation (DMO), said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.
“The labour crunch is here to stay for a longer time, thus, keeping a cap on production,” he added.
Indonesia’s DMO requires producers to sell 20% of their planned exports to the domestic market, as part of efforts to curtail a rise in domestic cooking oil prices.
Exports of Malaysian palm oil products for Feb. 1-15 rose between 18.8% and 23.6% from the previous month, rebounding from a dismal performance in January, according to data by cargo surveyors on Tuesday.
Dalian’s most-active soyoil contract rose 0.6%, while its palm oil contract gained 0.9%. Soyoil prices on the Chicago Board of Trade were up 0.4%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
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