KUALA LUMPUR, Nov 7: Malaysian crude palm oil futures inched higher on Friday as investors focused on the weaker ringgit against the dollar rather than steep overnight losses in crude oil.

Crude oil remained below $62, underscoring fears on the worsening health of the global economy, but was offset by prospects of the ringgit-based tropical oil becoming much cheaper.

The benchmark January contract on the Bursa Malaysia Derivatives Exchange edged 23 ringgit higher to 1,622 ringgit ($457) per ton by the end of the morning session..

Margins are looking better for refiners beause of the weaker ringgit, which lessens the effect of the falls in crude oil prices, said a trader with a foreign commodities broker.” Other traded months rose between 5 and 25 ringgit by the midday break . Overall trade volume slipped to 4,073 lots at 25 tonnes each from the usual 5,000 lots.

Palm oil has fallen nearly two-thirds from a peak of 4,486 ringgit in the past nine months due to easing crude oil prices, tight credit, higher supplies and weak demand from China and India.

We believe palm oil prices have hit rock bottom but a new upcycle cannot begin until the high inventory tapers off, which is likely to happen as both Malaysia and Indonesia are implementing a mandatory biodiesel blend, said OSK Investment Bank in research note.

Nevertheless, a strong rebound could not be ruled out as palm oil prices have overshot on the downside, consistent with our house view that the Malaysian market is primed for a bear market rally.

Officials have said palm inventories in top producers Indonesia and Malaysia totalled around 4 million tons at end-October, and analysts say end-stocks will climb to 5 million tons by year-end.

In Malaysia’s physical market, crude palm oil for November shipment in the southern region was 1,610/1,620 ringgit. Trades were done between 1,600 and 1,620 ringgit.—Reuters