Palm oil ends higher after tumbling to March 2009 low

KUALA LUMPUR: Malaysian palm oil futures ended higher on Monday, snapping an eight-day losing streak, as short-covering reversed losses from the morning session and helped the tropical oil stay above 2,000 ringgit.  
    Palm had tumbled to a March 2009 low of 1,954 ringgit in
early trade as financing troubles in China, coupled with
lacklustre export demand, triggered speculative selling.     
    A bout of covering in late trading, however, helped prices
recover some losses. 
    "There was a lot of short-covering due to an oversold
situation in the market in the last two days. A rebound in the
Dalian palm oil market also prompted the short-covering," said a
trader with a local commodities brokerage in Kuala Lumpur. 
    "But there's no fundamental reason for the rebound. All the
bearish news -- the higher production, low exports -- is already
well absorbed."
    The benchmark November contract on the Bursa
Malaysia Derivatives Exchange inched up 1.6 percent to 2,027
ringgit ($641) per tonne by Monday's close, pulling away from
the intraday low of 1,954 ringgit. 
    Total traded volume stood at 25,250 lots of 25 tonnes, below
the average 35,000 lots.     
    Technicals showed palm oil may fall further into a range of
1,950-1,968 ringgit per tonne, driven by a powerful wave three,
Reuters market analyst Wang Tao said. 
     
        
    Fears that global demand will be overwhelmed by a bumper
supply of edible oils this year also pressured the market. 
    "The main bearish factors are the large crop prospects for
soybeans in the U.S., rapeseed in Europe and sunflower seeds in
Ukraine and Russia. At the same time, palm oil is heading into
its peak production season," CIMB Research analyst Ivy Ng said. 
    "On top of this, some buyers from China, one of the largest
importers of palm oil, are having difficulties raising
financing, as banks clamp down on funding for commodities,
following the Qingdao port investigation."       
    Commodities are commonly used for financing in China, where
investors borrow against a product with the aim of investing the
money in high-return areas such as real estate. 
    Traders said the worries about a Chinese crackdown on
commodity financing began a few months ago, but had worsened in
the past week with investors trying to get rid of excess palm
oil stocks that have arrived at ports. 
    "People have overbought the oil and they don't know where to
dump it. They have to dispose of it - the selling pressure is
pushing prices of palm lower," the Kuala Lumpur trader said. 
    Sluggish demand for palm oil products this month also
weighed on the market. Cargo surveyor Intertek Testing Services
said exports of Malaysian palm oil from Aug. 1-25 fell 15.3
percent compared to the same period in July. 
    Another cargo surveyor, Societe Generale de Surveillance,
reported that exports for the same period fell 11.3 percent.
 
    Malaysian palm output, however, is seen picking up pace in
August. The Malaysian Palm Oil Association, a group of growers,
estimates that production rose 15.2 percent from Aug. 1-20. 
    In other markets, crude oil edged higher above $102 a barrel
on Monday with support from geopolitical tensions in Ukraine and
Libya, although ample supply limited the rebound from last
week's 14-month low.   
    In competing vegetable oil markets, the U.S. soyoil contract
for December gained 1.5 percent in late Asian trade,
while the most-active September soybean oil contract on
the Dalian Commodities Exchange fell 0.4 percent.
    
    
  Palm, soy and crude oil prices at 1052 GMT
                                                                  
  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      SEP4    2050   +28.00    1979    2050    1970
  MY PALM OIL      OCT4    2030   +37.00    1951    2046    7537
  MY PALM OIL      NOV4    2027   +31.00    1954    2045   29002
  CHINA PALM OLEIN JAN5    5174   -84.00    5104    5216 1021220
  CHINA SOYOIL     JAN5    6004   -24.00    5896    6012  651006
  CBOT SOY OIL     DEC4   33.09    +0.49   32.45   33.13   10792
  NYMEX CRUDE      OCT4   93.81    +0.16   93.28   93.89    9313
                                                                  
  Palm oil prices in Malaysian ringgit per tonne
  CBOT soy oil in U.S. cents per pound
  Dalian soy oil and RBD palm olein in Chinese yuan per tonne
  Crude in U.S. dollars per barrel
 
    
 ($1 = 3.161 Malaysian ringgit)
 ($1 = 6.1550 Chinese yuan)
 ($1 = 60.54 Indian rupee) 
- Reuters