Malaysian palm oil futures fell to a one-week low on Wednesday as market sentiment remained bearish over high inventory levels, before reversing its losses at the close of trade on short covering. The benchmark palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange closed up 0.2 percent at 2,136 ringgit ($524.82) a tonne, snapping three previous sessions of declines.
"There was some short covering towards the end of the day," said a futures trader in Kuala Lumpur. Earlier in the session, it fell as much as 1.1 percent to 2,109 ringgit, its lowest since March 19. The market had been weighed down by high inventories and weak demand, said two Kuala Lumpur-based traders.
"However, I am hearing that exports will be good for the full month of March," said one of them, adding that it was due to additional demand ahead of the Muslim fasting month of Ramazan. Ramazan, which begins in early May this year, usually sees higher usage of palm oil for cooking purposes, as Muslims break day-long fasts with communal feasting. Buyers usually stock up on the edible oil a month or two ahead of festivities.
Palm oil inventories in Malaysia, the world's second-largest producer and exporter, rose 1.3 percent to 3.05 million tonnes in February from a month earlier. In other related oils, the Chicago May soyabean oil contract fell 0.1 percent, while the May soyaoil contract on the Dalian Commodity Exchange was up 0.04 percent. The Dalian May palm oil contract fell 0.4 percent. Palm oil prices are affected by movements in soyaoil, as they compete for a share in the global vegetable oil market.
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