KUALA LUMPUR, Dec 7: Malaysian palm oil futures rose on Wednesday as crude oil prices of well above $100 a barrel raised the appeal of the edible oil's use in biofuels at a time when heavy rains are disrupting some supply.
Traders are also watching for more decisive action at the euro zone summit on Friday to resolve the region's debt crisis that has dragged palm oil prices down 18 per cent so far this year.
But many market participants are shifting their focus to better technicals in palm oil futures as well as output declining from November onwards due to monsoon rains and a seasonal decline in yields.
“The market had come off a little in the past few days and it is holding up at 3,100 ringgit due to the strength in other commodities markets, especially crude oil,” said a trader with a foreign commodities brokerage in Kuala Lumpur.
“Also, some bargain hunting has come in. I hear the Chinese are locking in some last minute cargoes for delivery in the first quarter of 2012,” the trader added.
Benchmark February palm oil futures on the Bursa Malaysia Derivatives Exchange settled up 1.1 per cent to 3,119 ringgit ($990) per ton.
Overall traded volumes stood at 15,411 lots of 25 tons each, much lower than the usual 25,000 lots as more investors turned cautious and waited on the sidelines.On Monday, prices hit a two-week high on reports of flooding in some areas of the world's second largest palm oil producer Malaysia.
Excessive rains, however, can affect the oil yield quality and force palm oil firms to sell the edible oil at a discount. So far, however, planters have not reported major logistics disruptions.
Brent crude was steady above $110 on Wednesday, as investors turned cautious ahead of a European summit.
US soyoil for January delivery barely moved in Asian trade, partly due to prospects of a big South American crop coming in next year and expectations the USDA will raise soy stocks forecast.
China's most active May 2012 soybean oil contract closed up 0.4 per cent.
In Johannesburg, it was reported that Malaysia is looking for more palm oil business opportunities across Africa as it seeks to grow the sector through joint ventures with international companies, Commodities Minister Bernard Dompok said on Wednesday.
“We have companies (in South Africa) from Malaysia doing joint ventures and we are encouraging more ... I think there is a lot of scope for more corporation of this type in South Africa,” Dompok said on the sidelines of a Palm Oil trade fair and seminar in Johannesburg.
“We are going to Nigeria next week and we are hoping to talk to investors there. We have gone to Morocco. There is quite of lot of interest on this continent, it is a growing continent.” Malaysia is the world's second biggest palm oil producer after Indonesia.
The government has projected 2011 crude palm oil output at 18.3 million tons, which is seen rising to 18.7 million tons in 2012.—Reuters