MUMBAI: Malaysian palm oil futures rose on Thursday due to weakness in the Malaysian ringgit and expectations of improved demand as the tropical oil started trading at a discount to rival soft oils.
The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange closed up 24 ringgit, or 0.62%, at 3,892 ringgit ($827.73) a metric ton.
The drop in the Malaysian ringgit and a rise US soyoil futures provided support to the market, said a Mumbai-based trader. The Malaysian ringgit, palm’s currency of trade, weakened 0.26% against the dollar.
A weaker ringgit makes palm oil more attractive for foreign currency holders. US soybean oil futures were up 0.43% on Thursday morning. “Palm oil exports had been falling since the oil was more expensive for buyers than soyoil and sunflower oil.
However, now that it is trading at a discount, exports are likely to pick up,” the trader said. Malaysian palm oil exports for May 1-20 fell between 8.3% and 9.6% from the month before, according to cargo surveyors.
Malaysia’s palm oil production is gaining momentum and there is a need to accelerate exports to avoid a further buildup in stocks, said a Kuala Lumpur-based trader.
Malaysia’s palm oil stocks increased at the end of April for the first time in six months as production jumped despite a drop in exports, the industry regulator said earlier this month. Palm oil may fall into a range of 3,812-3,832 ringgit per metric ton, as the first bounce from 3,767 ringgit has completed, according to Reuters’ technical analyst Wang Tao.
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