Malaysian palm oil futures rose to a near-three-week high on Tuesday on a bout of technical buying, traders said, while plans to increase the use of palm oil in biodiesel by the world's No 2 grower received a lukewarm response from market players. The benchmark January contract on the Bursa Malaysia Derivatives Exchange rose to 2,216 ringgit in late trade, the highest since October, 9, before ending up 2.1 percent to 2,212 ringgit ($676) per tonne by the day's close.
"Technical buying is keeping the market on the supportive side after some mild correction yesterday," said a trader with a foreign commodities brokerage in Kuala Lumpur. Total traded volume stood at 51,423 lots of 25 tonnes, above the usual 35,000 lots. Malaysia, the world's second-largest palm producer, on Tuesday said it would increase the amount of palm oil in biodiesel to 7 percent from November onwards, up from 5 percent now.
The "B7" biodiesel mandate, targeted to be fully implemented nation-wide by December this year, is expected to boost the domestic use of biodiesel to 575,000 tonnes a year, Malaysia's plantation industries and commodities minister said. "There are still many things that are unknown, so even if everything comes into play, it will still have a minimum impact on prices," said a second Kuala Lumpur-based dealer. "We need to quantify how much palm is actually being used."
Technicals showed that palm oil looks neutral in a range of 2,164-2,195 ringgit per tonne, with any escape pointing its likely direction, said Reuters market analyst Wang Tao. But Tao added that the bias seemed to be towards the upside, which means palm oil may rise above 2,195 ringgit and then gain further to 2,223 ringgit. In competing vegetable oil markets, the US soyoil contract for December rose 1.4 percent in late Asian trade, while the most active January soybean oil contract on the Dalian Commodities Exchange eased 0.1 percent.