KUALA LUMPUR (Reuters) — Malaysian palm oil futures climbed to their highest level in more than five weeks on Wednesday after healthy demand for the tropical oil fuelled hopes that stockpiles would be kept in check despite a seasonal rise in output in the world’s top producers.
Shipments of Malaysian palm oil products in the first half of October rose 6.6 percent to 781,043 tonnes compared to a month before, cargo surveyor Intertek Testing Services said, fuelled by higher demand from Europe and China.
Another cargo surveyor, Societe Generale de Surveillance, said exports for the same period climbed 11.8 percent.
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For the whole month of September, Malaysia’s exports rose 5.2 percent to 1.61 million tonnes, while the world’s largest producer, Indonesia, sold 1.64 million, 11 percent more than in August.
Oil palm trees produce bigger yields during the cycle that starts in the second half of the year and typically peaks in October. But strong exports have led some market players to trim their stocks forecasts.
“Two months ago everyone thought stocks would peak at 2.2 to 2.3 million tonnes. Right now we are looking at 2.1 million tonnes, maybe not even exceeding 2 million tonnes. These are very bullish stocks figures,” said a trader with a foreign commodities brokerage.
“Even if production peaks in October, it’s not that significant because of the low numbers from September,” the Kuala Lumpur-based trader added. End-stocks currently stand at 1.78 million tonnes.
By Wednesday’s close, the benchmark January contract on the Bursa Malaysia Derivatives Exchange had risen 1.8 percent to $759 per tonne, the highest since Sept. 9.
Total traded volume stood at 39,694 lots of 25 tonnes each, higher than the usual 35,000 lots.
Technicals showed that Malaysian palm oil is expected to test support at 2,349 ringgit per tonne, a break below which will open the way towards 2,317 ringgit, Reuters market analyst Wang Tao said.
Stocks could shrink to about 1.5-1.6 million tonnes in 2014, leading to tighter global oilseed supplies, the trader said.
But investors remain cautious because of U.S. fiscal talks and are avoiding risky bets for now.
U.S. Senate leaders are continuing to negotiate on legislation to raise the government’s borrowing authority and provide funding. Lawmakers said a deal was close, but there were still details to be worked out.
Malaysia, the world’s No.2 palm oil producer, has set its crude palm oil export tax for November at 4.5 percent, a government circular showed on Wednesday.
In other markets, global oil prices held steady on Wednesday as the U.S. Senate inched towards a last-minute deal.
In competing vegetable oil markets, the U.S. soyoil contract for December rose 1.1 percent in late Asian trade. The most active January soybean oil contract on the Dalian Commodities Exchange rose 0.7 percent.
