MUMBAI (Commoditiescontrol)-
Malaysian Palm Oil Futures
Malaysian palm oil fell on Friday evening in a second day of declines, weighed down by a stronger ringgit, its currency of trade.
However the benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange during the week ending 29 December gained by 1.62%, or RM 40, to close at RM 2,498 a tonne.
The market dropped earlier, tracking losses in soyoil on the Chicago Board of Trade and high inventories, but could hold near current levels on expectations of improving demand and weaker output.
Palm oil prices have been trending downwards since November, after India raised import taxes on edible oils to their highest in more than a decade, cutting demand.
The ringgit strengthened quite a bit. A stronger ringgit typically makes palm oil more expensive for holders of foreign currencies and weakening demand.The ringgit strengthened 0.5 percent against the dollar on Friday evening at 4.0440.
December's end-stocks are expected to be the highest of the year and that has been putting pressure on prices this month.
Palm oil shipments from Malaysia, the world's second largest producer after Indonesia, rose about 1 percent during Dec. 1-25 versus a month earlier, showed data released by cargo surveyors Intertek Testing Services (ITS) and Societe Generale de Surveillance (SGS).
Demand is expected to improve in the coming weeks as key buyer China stocks up ahead of Lunar New Year celebrations in February.
Malaysian palm oil production is seen declining through the first quarter of next year, in line with seasonal trends. Output fell 3.3 percent to 1.94 million tonnes in November.
In other news the spread between CPO to gasoil (CPO-GO) fell to its lowest level in over 2 years, down to a difference of just US$23/ton between the two. A sharp jump in gasoil prices to US$599/ton (up 2.61%), pulled up by a rise in Brent Crude oil to a near two and a half year high of US$67/barrel is behind the sharp narrowing of the spread.
A narrow CPO-GO spread generally makes biodiesel blending a more attractive option, because CPO (and palm methyl ester or PME) is much cheaper than gasoil. PME is a feedstock derived from CPO used in blending with regular diesel to produce biodiesel. If the current narrow CPO-GO spread persists, it could result in a ramping up of discretionary blending in the region, particularly in Thailand and Indonesia. It could also provide an impetus for Malaysia to (finally) implemented its long-delayed B10 biodiesel mandate.
Domestic RBD Palmolein Scenario
RBD palmoelin price during the week ending 30th December gained by Rs 8 to trade at Rs 618/10kg at kandla port and also CIF price edged higher by $17 at $652 tracking positive cues of Malaysia Palm Oil Futures.
Demand of RBD palmolein in domestic market is limited as it solidifies during winter season so most of the refiners do not use it for blending with other edible oils which is capping the upside of RBD palmolein.
RBD palmolein is trading at a discount of $153/tonne to soy oil which is on higher side so in coming days we may witness some lower level buying interest by importers.
NEXT WEEK: RBD palmolein prices are likely to trade as per the trend of Malaysian Palm Oil Futures.
(By Commoditiescontrol Bureau; +91-22-40015516)