Palm oil reverses losses on rosy demand outlook

SINGAPORE: Malaysian palm oil futures rebounded slightly on Wednesday, as an upbeat demand outlook for the edible oil offset earlier losses on the back of lower crude oil that was weighed by Saudi Arabia's supply pledge.

Palm oil hit a 9-month high of 3,418 ringgit last week, and the rally appeared to be losing some steam after two straight days of losses this week.

But Malaysian export numbers helped snap the losing trend, and futures are trading 6.1 percent higher this year.

"Some market players are buying on export optimism, and the upcoming export figure may reflect stronger demand," said a dealer with a foreign brokerage in Malaysia.

Benchmark June palm oil futures on the Bursa Malaysia Derivatives Exchange edged up 0.1 percent to close at 3,368 ringgit ($1,096) per tonne.

Traded volumes stood at 19,259 lots of 25 tonnes each, thinner than the usual 25,000 lots.

Malaysian palm oil exports increased by 14 percent for the first 20 days of March from a month ago, indicating that demand is still healthy demand despite a slowdown compared to the near 40 percent jump in the first 15 days.

Traders are also paying close attention to a strike by Argentina's truckers, which disrupted the flow of soybeans to the country's main ports for a second day after union leaders failed to reach a deal with the government.

Brent crude edged towards $125 a barrel on Wednesday, rebounding from sharp losses a day earlier, as lower-than-expected US crude stocks and a weaker dollar offset the prospect of top exporter Saudi Arabia ramping up supply.

In other vegetable oil markets, the most active US soyoil contract for May delivery gained 0.3 percent in Asian trade while the most active September 2012 soyoil contract on China's Dalian Commodity exchange lost 0.5 percent.

"Traders are looking forward to the US Department of Agriculture planting forecasts due at the end of March. Other than that, the market is pretty steady right now," said Huang Zhi Qiang, an analyst with Guotai Junan Futures in Shanghai.