Malaysian palm oil futures ended flat on Monday, after dropping to a five-week low in the previous session, as falling crude and an uncertain supply and demand outlook offset positive export numbers from No 2 producer Malaysia. The benchmark September crude palm oil contract on the Bursa Malaysia Derivatives Exchange closed nearly 0.2 percent lower at 3,193 Malaysian ringgit ($1,051) a tonne, after hitting an earlier high at 3,221 ringgit.
Exports of Malaysian palm oil products for June 1-20 rose 22 percent to 969,804 tonnes from 794,322 tonnes shipped during May 1-20, cargo surveyor Intertek Testing Services said. "Palm oil is range-bound," said one palm oil trader. "Export numbers are good ... they are expected to be better than last month because of Ramazan. "We are moving towards the Muslim festival - there will be strong demand from countries in the Middle East and Pakistan," he added.
Palm olein's discount to competing soyoil has widened at a time when China and India are restocking. Muslim countries are also in the market to buy extra supplies ahead of Ramazan in August, when vegetable oil consumption rises as fasting in the day is followed by feasts and dinner gatherings at night.
Traded volume for the September contract closed at 13,236 lots of 25 tonnes each, versus a total at 18,364 lots on Friday. On Friday, benchmark prices touched its lowest level since May 6 at 3,163 ringgit, due in part to growing stock levels. Stocks in Malaysia are expected to rise above a 16-month high of 1.92 million tonnes hit last month. While this could draw in more demand, the country is going through a high production period.
Not all market players agree that demand will overcome rising output in Southeast Asian producers. "We have a bearish view," said John Rachmat, analyst at Royal Bank of Scotland. "Both in Malaysia and Indonesia, the weather is so much more conducive to good production this year, compared to last year. "Out of India and China I do not expect an extra ordinary amount of consumption growth ... (and) a lot of European governments are cutting back on renewable energy subsidies for obvious reasons." He added that benchmark prices could trade at around 2,500 ringgit at the end of this year.
In related markets, crude oil prices fell by more than $1, extending last week's losses, with risk aversion rising after eurozone finance ministers postponed a final decision on emergency loans to Athens. "The downward pressure came from crude oil," said another trader. "I'm bearish for the short-term, with prices climbing back on short-covering prior to Eid and the holiday break." US soyoil for July delivery was steady in Asian trade, while the most active January 2012 soybean oil contract on the Dalian Commodity Exchange was little-changed.