KUALA LUMPUR: Malaysian palm oil futures reversed course to trade higher on Friday, supported by a weaker ringgit and the U.S. decision to reduce tariffs on goods from Malaysia.
The benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange gained 14 ringgit, or 0.33%, to 4,244 ringgit ($992.75) a metric ton at the midday break.
However, the contract is headed for a second consecutive weekly decline, falling 1.68% so far.
A rebound in South American soyoil and a weaker ringgit helped prices recover from the early setback while the reduction of U.S tariffs on Malaysian goods to 19% from 25%, has removed some bearishness from the market, said Anilkumar Bagani, research head at Sunvin Group.
Meanwhile, Paramalingam Supramaniam, director at brokerage Pelindung Bestari said the market is awaiting production and export data for July and once these figures are released, there should be a clearer picture of market direction.
“As far as Malaysia is concerned, we are seeing better than expected production in July. However, exports remain very weak, and we expect ending stocks to rise above 2.1 million tons for July,” Supramaniam added.
Cargo surveyors estimated that palm oil exports fell between 6.7% and 9.6% in July.
The Malaysian Palm Oil Board is expected to release its July supply and demand data on August 11.
Dalian’s most-active soyoil contract rose 0.24%, while its palm oil contract gained 0.04%. Soyoil prices on the Chicago Board of Trade were up 0.37%.
Palm oil tracks price movements of rival edible oils, as it competes for a share of the global vegetable oils market.
The ringgit, palm’s currency of trade, weakened 0.35% against the dollar, making the commodity cheaper for buyers holding foreign currencies.
Oil prices were little changed after falling more than 1% in the previous session as traders digested the impact of new, higher U.S. tariffs that may curtail economic activity and lower global fuel demand growth.
Weaker crude oil futures make palm a less attractive option for biodiesel feedstock.
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