Palm oil futures headed for the first weekly gain in a month on speculation production may be slowing even as demand is sustained during the global recession.
The price may be “well supported” at about 1,800 ringgit ($498) a ton on signs of lower output, Penny Yaw, an analyst at Citigroup Inc., said on Tuesday. Exports from Malaysia, the second- largest producer, “should pick up by March,” Yaw wrote.
Palm oil for April gained 1.8 percent to 1,879 ringgit a metric ton on the Malaysia Derivatives Exchange. Futures have gained 5.6 percent this week.
Planters in Southeast Asia are in a seasonal “low-crop” period, capping potential supply, Lee Oi Hian, chief executive of Kuala Lumpur Kepong, said this week. The head of the Malaysia’s third-largest grower was “bullish” about prices.
Malaysia’s palm oil exports fell 19 percent to 1.3 million tons in January from December’s record, Societe Generale de Surveillance, an independent cargo surveyor, estimated on Wednesday. Shipments in December helped cut a record inventory by 12 percent to 2 million tons.
'Cheaper prices, better supply seem to outweigh the recession when it comes to demand'
Report from UK Home-Grown Cereals Authority
“Cheaper prices, better supply seem to outweigh the recession when it comes to demand” for vegetable oils, the Home-Grown Cereals Authority of the UK said in a report on its Web site. “The very large palm oil stocks are one of the main reasons why vegetable oil prices have fallen so sharply.”
Palm oil, used mainly in cooking, is the cheapest cooking oil and the main substitute for soybean oil, which is produced mainly in the US, Argentina and Brazil.
Soybean oil for March delivery in Chicago rose 0.4 percent to 32.47 cents a pound at 6:03 p.m. Singapore time, making it about 38 percent more expensive than palm oil.
Soybean oil has declined 40 percent in the past six months, with palm oil losing 33 percent, according to Bloomberg data.
Indonesia’s state-owned joint marketing office accepted bids for all of 5,500 metric tons of palm oil offered in an auction in Jakarta on Thursday, Aziz Kahar, head of sales, said by phone.
The agency sold 500 tons ex-factory Medan and 2,500 tons on a free-on-board basis from Belawan port in North Sumatra Province to PT Musim Mas at Rp 6,626 per kilogram.
PT Inti Benua Perkasatama bought 1,500 tons from Dumai port at Rp 6,626 and 1,000 tons from Siak port in Riau Province at Rp 6,536.
In another auction, PT Astra Agro Lestari Tbk, Indonesia’s No.1 publicly-traded plantation company, sold all of the 6,000 tons of palm oil it had offered. It sold 3,000 tons from Riau at between Rp 6,511 and Rp 6,635 per kilogram. It sold 1,000 tons from Jambi Province at
Rp 6,505 and 2,000 tons from Kumai on Kalimantan Island at Rp 6,460 rupiah.