Palm Oil Ends at Highest Price in 16 Months on Exports, Demand Optimism

Palm oil jumped to the highest close in more than 16 months as exports increased from Malaysia, the second-biggest producer, and as advancing stock markets boosted optimism over the economic recovery and commodity demand. 

December-delivery palm oil surged 1.3 percent to 2,735 ringgit ($885) a metric ton on the Malaysia Derivatives Exchange, the highest finish since May 13, 2009. The tropical oil traded as high as 2,755 ringgit today. 

Palm oil exports from Malaysia climbed 15 percent to 1.08 million tons in the first 25 days of September compared with the same period in August, independent cargo surveyor Societe Generale de Surveillance estimated today. The MSCI Asia Pacific Index reached a five-month high as a rebound in U.S. capital goods orders boosted optimism in the global economic recovery. 

“The buoyancy is liquidity-driven, as everyone wants to play the soft commodity theme, the whole Asian consumption story and dollar weakness,” Ben Santoso, a plantation analyst at DBS Vickers Securities (Singapore) Pte., said today. The gain in Malaysian exports was higher than expected, he said. 

While investors may be buying into “the bullish news,” in the short term, palm oil inventories “have turned back up again and by the end of this month will be even higher,” Santoso said. Prices reflect “a clear signal of exuberance,” he said. 

Palm oil has rallied for four straight weeks as demand rose ahead of festivals and excess rains hurt harvests, causing stockpiles to drop for seven months through July.

Malaysian inventories advanced in August, jumping 23 percent to 1.72 million tons from July, the country’s palm oil board said Sept. 15. 

Expanding Inventory

Inventories may rise again in September, hurting prices for “the next four to six weeks,” Dorab Mistry, a director at Godrej International Ltd. who has traded edible oils for more than three decades, said yesterday in Mumbai. 

“Prices will likely remain range-bound into the end of the year with not much catalyst to bring prices past 3,000 ringgit per metric ton,” said Bernard Ching, an analyst at ECM Libra Investment Research, in a report today. 

Stockpiles are likely to grow as increased supply coincides with diminishing demand as major festivals in China and Indonesia end. China, the largest user of edible oils, marked the mid-autumn festival last week and will celebrate National Day in the week starting Oct. 1. 

Indonesia, with the largest Muslim population, had its biggest Islamic holiday earlier this month, which traditionally spurs demand for palm oil. 

Palm oil may tumble as much as 7.4 percent by the end of October as Malaysian production rebounds and Indonesian growers speed up shipments, Mistry said. 

Growth in global vegetable oil supplies may lag behind demand for a third year, Mistry said yesterday. Palm oil may climb as high as 3,200 ringgit a ton by January as soybeans advance to $12 a bushel by December, he said. 

CME Group Inc.’s December-palm oil contract, which is pegged to the Malaysian benchmark price, was little changed at $889.50 a ton. On the Dalian Commodity Exchange, May-delivery palm oil closed 2.6 percent higher at 7,794 yuan ($1,164) as trading resumed after a three-day break. Source: Bloomberg