Palm climbs more on weakening ringgit, traders wary
JAKARTA: Malaysian palm oil rose for a second day on Wednesday, recouping some of its recent losses, but traders were wary and questioned how far the recovery could go since demand remained weak.
"Today is a technical retracement," said a trader at a foreign commodities brokerage in Kuala Lumpur, adding that a weakening in the ringgit on Wednesday had provided support.
The improvement in palm prices on Wednesday was a reaction to the decline of more than 10 per cent seen since mid-January, a second trader said.
"The drop was a bit on the sharp side. It was overdone," he said. "Nothing is going on. The FOB prices are basi- cally unchanged. In the cash market there is nothing."
By the Wednesday's close, the benchmark April contract had gained 1.47 per cent to 2,207 ringgit ($ 610) per tonne, after opening lower at 2,164 ringgit. Traded volume stood at 55,607 lots of 25 tonnes, well above the typical 35,000 lots.
Despite that high volume, demand for palm oil remained weak, traders said, partly as a result of oil prices that have subsided around 60 per cent since mid- 2014, limiting demand for biodiesel.
Malaysia's Sime Darby Bhd, the world's top oil palm planter by land size, said on Wednesday it had obtained the European Commission's approval to buy New Britain Palm Oil Ltd for about $1.74 billion.
Oil slipped to $49 a barrel on Wednesday after an industry report said US crude stocks rose by the most in two decades last week, and as a firmer dollar added to pressure on prices.
The US soyoil contract for March fell 0.23 per cent in Asian trade. The most active May soybean oil contract on the Dalian Commodity Exchange shed 0.5 per cent.
The Malaysian ringgit weakened by 0.48 per cent to 3.6165 per dollar and has now lost almost 15 per cent since September. A weaker ringgit normally leads to increased demand for palm, since it makes the oil cheaper for foreign buyers. - Reuters