[KUALA LUMPUR] Malaysian benchmark palm oil futures rose on Tuesday, overcoming a stronger ringgit , as demand for the tropical oil ahead of the Muslim festival of Ramadan pushed up prices.
Demand for palm oil usually comes in one to two months before Ramadan, which begins in early June this year. The Muslim festival is a month of fasting and feasting, which sees higher demand for palm oil used in cooking, leading up to Eid.
The new palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange was 0.5 per cent higher at RM2,600 (S$885.05) per tonne in the evening.
Traded volumes stood at 49,902 lots of 25 tonnes each at closing trade, above the 2015 daily average of 44,600.
"Although the ringgit is stronger today, the market is covering for May and June as Ramadan demand is there," said a Kuala Lumpur-based trader.
The Malaysian ringgit rose as crude oil futures held near six-week highs, easing concerns over the country's falling gas and oil revenues. A stronger ringgit, the currency in which palm oil is traded, typically makes it more expensive to buy for foreign currency holders.
"Everyone wants to rush the shipments before Eid. The half a per cent rise (in crude palm oil export tax) won't make much of an impact, it's very marginal," the trader said.
Malaysia its raised export tax on crude palm oil to 5.5 per cent for June, a government circular showed on Tuesday. The world's second largest palm oil producer set the export tax at 5 per cent for April and May.
Palm oil shipments rose 14-16 per cent in the first half of May compared with the same time period a month ago, according to data from cargo surveyors, lifted by rising demand from Europe, Pakistan and India.
Palm oil is expected to rise to RM2,631 per tonne now it has cleared resistance at RM2,605, according to a technical analysis by Wang Tao, a Reuters market analyst for commodities and energy technicals.
In competing vegetable oils, the September soybean oil contract on the Dalian Commodity Exchange rose 1 per cent, while the Chicago Board of Trade soyoil contract for August was up 0.3 per cent.
The offer price for crude palm kernel oil stood at RM4,877.71 a tonne in the evening, according to price assessments by Thomson Reuters.