Crude Palm Oil Ends Up On Demand Prospects, Short Covering - PalmOil HQ

Crude palm oil futures on Malaysia’s derivatives exchange extended gains Friday, rising briefly to a 17-day high as traders covered short positions ahead of a monthly U.S. Department of Agriculture crop report later in the day and local production and stock data due Monday.

The benchmark June CPO contract on the Bursa Malaysia Derivatives ended MYR71 or 2.1% higher at MYR3,399 a metric ton, after climbing to MYR3,400/ton, it’s highest since March 22.

Demand for palm oil is set to improve in April, since the continuing rally in Chicago soyoil futures will keep the tropical oil at a wide discount of $180-$200/ton to soyoil.

The favorable demand outlook has outweighed the prospect of rising production in Malaysia, the world’s second-largest supplier of palm oil after Indonesia, after two consecutive years of declines due to weather events.

Futures may test resistance at MYR3,500/ton next week “if MPOB [Malaysian Palm Oil Board] numbers point to lower stock levels compared with trade estimates of 1.60 million tons,” said a trading executive at a Kuala Lumpur-based commodities brokerage.

Palm oil, found in products from biscuits and butter to cooking oil and biodiesel, was also supported by the strength in crude oil futures. New York Mercantile Exchange May crude has risen above $111 a barrel due to discouraging reports about developments in the civil war in Libya.

The government-linked MPOB and cargo surveyors Intertek Agri Services and SGS (Malaysia) Bhd. are scheduled to issue export and production data Monday. The MPOB reported that crude palm oil output reached 1.09 million tons in February, when end-month stocks were at 1.48 million tons. SGS estimated that Malaysia’s March exports rose 2.3% from a month earlier to 1.12 million tons, while Intertek Agri Services estimated that exports were little changed at 1.11 million tons.

The most-active rupiah-denominated June CPO contract on the Indonesia Commodity & Derivatives Exchange was up 1.4% at IDR9,770 a kilogram, while CME Group’s dollar-denominated palm oil contract for June delivery also had risen $25.50 to $1,118.75/ton at 1024 GMT.

Open interest on the BMD was 90,009 lots, compared with 94,384 lots Thursday. One lot is equivalent to 25 tons.

A total of 32,390 lots were traded versus 24,264 lots.