KUALA LUMPUR: Malaysian palm oil barely moved on Tuesday with traders divided between selling on concerns of slower demand and taking positions on the Libyan unrest that boosted other commodity markets.
Palm oil futures were treading water after hitting a four-week low a day ago as traders looked for signs that the recent rally in prices may dampen demand.
But if unrest continues in Libya, which is a key oil producer, US crude could rally further, pulling along prices of palm oil used as a feedstock in biofuels that competes with petroleum diesel.
"Investors are fed up with the high palm oil prices, which is now $60 premium over soyoil. It could slow down overseas demand, especially if riots in Middle East continue," said a trader in Kuala Lumpur.
Usually, soyoil trades at a $100 premium to palm oil.
By midday, benchmark May 2011 palm oil futures on the Bursa Malaysia Derivatives Exchange edged up 1 ringgit to 3,657 Malaysian ringgit in choppy trade. Overall trade stood at 9,389 lots at 25 tonnes each from the usual 7,500 lots.
Reuters technical analysis on palm oil was upbeat, showing a bearish target at 3,570 ringgit per tonne has been aborted as the market failed to break through a strong support at 3,610 ringgit, a low touched on Jan. 18.
Competing markets edged higher. US soyoil for March delivery rose 0.9 percent on the first trading day after Monday's public holiday.
The most active soyoil on China's Dalian Commodity Exchange rose half-a-percent on higher crude oil prices although traders were watching for any government move on import tariffs.
"It's all up to the soybean production in South America in the coming months. They could scrap the tax reduction proposal if the weather turns better," said one trader from China.
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