Palm rebounds to near 1-week high as soy, lower output estimates lift

[KUALA LUMPUR] Malaysian palm oil futures rebounded in late Wednesday trade to their highest in nearly a week, reversing intraday losses as gains in competing soyoil markets as well as hopes for smaller output in December supported prices.

Prices in early trade had slipped nearly 2 per cent to hover at more than two-month lows, tracking losses in overnight US soybean oil and volatility in crude oil markets.

"There signs of recovery in the crude oil futures, US soybean oil and more importantly the estimates for December output," said a trader with a local commodities brokerage in Malaysia, adding that traders expect December palm production to dip by as much as 13-14 per cent.

"This talk, and some buying in the cash market lifted futures. Speculators were keen buyers today after seeing prices plunge the previous two days," the trader added.

The benchmark February contract on the Bursa Malaysia Derivatives Exchange ended 1.4 per cent higher at RM2,170 (US$631) per tonne, with intraday prices pulling up from a low of RM2,102 to reach RM2,185 - a Nov 27 high.

Total traded volume stood at 57,888 lots of 25 tonnes, much higher than the usual 35,000 lots.

The US soyoil contract for December fell as much as 3.4 per cent on Tuesday to 31.12 cents a pound, pressured by fears of a bumper South American soybean output.

The contract later rose 1.3 per cent by 1040 GMT. The most active May soybean oil contract on the Dalian Commodity Exchange eased 0.3 per cent.

Analysts say beneficial rains have boosted expectations of South American soy production, and more crop-friendly weather is expected in the coming days.

Bigger supplies of competing soybeans could channel food and fuel demand away from palm oil.

Some market players say the volatile oil market will heavily influence palm oil futures in the near term, and limit gains in the tropical oil.

"Weak crude oil prices is the main thing. The next support for palm is between RM2,025-2,050, with the higher side to be capped at RM2,180," a second Kuala Lumpur-based trader said.

Trade in oil has been turbulent since OPEC said last week it would not lower output despite an oversupplied market.

Brent rose to US$70.75 a barrel by 1016 GMT, after falling US$2 on Tuesday. US crude rose to US$67.33, up 45 cents from the previous session when prices dropped more than US$2.

REUTERS