RTRS:VEGOILS-Palm dips; EU debt deal checks losses
By Michael Taylor
JAKARTA, Oct 28 (Reuters) - Malaysian palm oil futures eased
slightly on Friday, snapping a four-day winning streak, but
prices remained near a five-week high as optimism stemming from
a deal to solve Europe's debt problems checked losses.
Euro zone leaders struck a deal with private banks and
insurers on Thursday for them to accept a 50 percent loss on
their Greek government bonds under a plan to lower Greece's debt
burden and try to contain the region's crisis.
Benchmark January palm oil futures FCPOc3 on the Bursa
Malaysia Derivatives Exchange traded 0.2 percent lower at 2,973
Malaysian ringgit ($958) a tonne, after having earlier touched
2,999. In the previous session, prices hit 3,007, a level not
seen since Sept. 22.
Traded volumes for the January palm contract stood at 5,911
lots of 25 tonnes each, compared with 13,281 lots on Thursday.
"A lot of profit taking is going on, once prices hit the
3,000 level," said a Kuala Lumpur-based trader. "The longs will
have to stay cautious for the time being.
"The price may retreat a bit more, before it has a chance to
move higher," he added. "Technically it looks positive and I
wouldn't be surprised if prices go above 3,000 again next week."
A slowdown in Europe, the second-largest palm consuming
region after Asia, could weaken demand, although palm oil could
maintain its market share in the region as it is the cheapest
edible oil.
In a volatile trading session, palm prices slipped to a low
at 2,970 ringgit, although prices have climbed around 3 percent
this week and 2 percent for the month.
Palm oil sentiment is improving, despite the
uncertain global economic outlook, due to lower production
expectations as dominant Southeast Asian producers enter the
rainy season.
A weaker version of La Nina may reappear this year and if
the weather pattern develops at the end of this year, it could
coincide with rainy season on top palm oil producers Indonesia
and Malaysia.
La Nina, a cooling of sea-surface temperatures in the
Pacific Ocean, triggers drought in places such as Texas and
harsher winters elsewhere in North America, but causes
above-normal rainfall in Southeast Asia and eastern Australia.
Demand is also showing some signs of improving, with data
earlier this week showing Malaysian exports rose around 15
percent for Oct. 1-25.
"Obviously you've had a lot of supply come through in
April-May," said Victor Thianpiriya, an agriculture commodity
analyst at ANZ. "But so far the demand has kept up with that
level of production ... and while production peaks in
October/November, it starts to come off in December."
"Palm is still heavily discounted against soybean oil," he
added. "India continues to be a large buyer of palm oil,
likewise for China."
Reuters technical analyst Wang Tao said palm oil faces a
resistance at 3,014 ringgit per tonne, and only a break above it
could open the way towards 3,087 ringgit.
In comparative markets, U.S. soyoil for December delivery
slipped in Asian trade, while China's most active May
2012 soybean oil contract <0#DBY:> also eased.
Brent crude slipped after rising nearly 3 percent in the
previous session, but optimism surrounding Europe's rescue
initiatives has kept prices firm above $111, while U.S. crude is
on track for its biggest weekly gain since February.
Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in U.S. cents per pound
Dalian soy oil in Chinese yuan per tonne
Crude in U.S. dollars per barrel
