Palm Oil Futures Higher: Good News for D-8

Kuala Lumpur, Malaysia | January 07, 2008 by D-8 Secretariat

Malaysian crude palm oil futures higher on Friday as investors waited for the crude oil market to break past a key resistance level before taking up positions, reports Reuters.

Crude markets have a growing influence on palm oil and soyaoil prices because of the use of edible oils to produce biofuels, which compete with petroleum diesel. Expectations of strong export data from cargo surveyors next week kept the market on the upside along with wet weather worries in major palm producing areas.

The benchmark February contract on the Bursa Malaysia Derivatives Exchange ended up 6 ringgit to 2,926 ringgit ($883). The market is ready for a rally but the question is when will crude and soyoil give that boost, an analyst with a foreign brokerage said.

Palm oil, used in products ranging from suntan lotion to cooking oil, is just 4.6 percent off the record high. There is strong talk that exports are going to rise, which will put to rest all those doubts that demand has completely died out at these high price levels, said a head dealer of a commodity trading firm. He added that exports for Dec. 1-15 were seen rising at 728,000 tons, up roughly 6 per cent from the same period last month.

Cargo Surveyors Intertek Testing Services will unveil its export data over the weekend while Societe Generale de Surveillance will announce its estimates on Monday. Other traded months rose marginally except for March 2008 contract which was unchanged. Overall trade fell to a quarter at 3,825 lots of 25 tons each.

Oil recovered on Friday, after falling sharply a day earlier on concerns about the US economy, the strengthening dollar and the market’s failure to break above a key resistance level of $95 a barrel. Palm oil is getting some support from the problems of heavy floods and in the cash markets there are no deals as some suppliers cannot guarantee delivery without higher premiums, said a trader with a plantation firm.

Together with Indonesia, Malaysia records around 89% of all palm oil production of the world. D-8 Director, Amb. Kia Tabatabaee, said that this enormous potency should be very well worked upon for the benefit of more rapid economic growth of the countries and D-8 memberstates, as there is also a strong trend nowadays to use palm oil as biofuel, since palm oil is considered to be a significant step towards greener enviroment protection, due to its ability to reduce aviation industries’ oil consumption and carbon dioxide emissions.

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