Malaysian palm oil futures reversed losses in late trade on Tuesday, in response to a stronger performance by US soybean oil, plus Malaysia's commitment to raise the minimum bio content in biodiesel, which will boost palm oil consumption.
Benchmark palm oil futures for October delivery on the Bursa Malaysia Derivatives Exchange rose 1.7% to RM2,309 (US$569) per tonne at the close of trade, its strongest daily gain since July 20.
Traded volumes stood at 48,297 lots of 25 tonnes each, above the 2015 average of 44,600.
Improvement in US soy was a likely reason, one futures trader from Kuala Lumpur said, while another trader said Malaysia's biodiesel plans could be another supportive factor.
Malaysia, the world's second largest palm producer after Indonesia, said on Tuesday it would still raise the minimum bio-content to 10% for the transport sector this year, but not in July as initially expected.
"B10 will still be implemented this year, and the market is retracing on an oversold condition," said the trader.
Malaysia had earlier said it would introduce its so-called B10 biodiesel mandate by July, a month later than earlier announced, and see its full implementation by August.
This new mandate will increase the bio content in biodiesel and use more palm oil for blending purposes, increasing demand and supporting local prices.
Palm is down 3.5% so far this month and looks set for its second monthly drop in a row as weaker performing vegetable oils weigh on market sentiment.
Last Thursday, October palm oil had climbed to a two-week top before turning back south under pressure from the weakness in Chinese palm and soy markets.
The January palm olein contract on the Dalian Commodity exchange fell 0.4%, while the January soybean oil contract declined 0.8%.
Palm oil shipments from Malaysia, the world's second-largest producer of the vegetable oil, rose about 15% during July 1-25 compared with a month earlier, according to cargo surveyor data released on Monday.
In other related vegetable oils, the Chicago soybean oil contract for December rose 1.1%.
Malaysian palm oil futures extended losses on Monday, coming off last week's two-week high, as weakness in overseas soybean oil prices lured buyers away from the tropical oil.
Palm's rival soy fell sharply on Friday on the Chicago Board of Trade on expectations of a bumper US crop this fall. Dalian prices slipped a percent on the day and looked set to extend their losses this week.
Benchmark palm oil futures for October delivery on the Bursa Malaysia Derivatives Exchange fell 2.2% to RM2,268 (US$560) per tonne at the close of trade, an intraday and near one-week low.
Traded volumes stood at 33,690 lots of 25 tonnes each on Monday evening, compared with the 2015 average of 44,600.
Palm oil plunged to a 10-month low earlier this month before recovering to a two-week high of RM2,368 last Thursday. It has lost 1.4% so far this month.
"The decline is due to soybean oil prices, which came off sharply on Friday," said a futures trader from Kuala Lumpur, adding that export demand did little to lift prices despite improving data from cargo surveyors.
"The pipeline is dry, so they are buying to have some oil in hand. It's not serious buying, but the figures are good in comparison to June," he said.
Reports from cargo surveyors Intertek Testing Services and Societe Generale de Surveillance showed exports of Malaysian palm oil products from July 1-25 rose about 15% from the same time period last month, led by improved demand from Europe and China.
The Chicago soybean oil contract for December declined 1%, while the January soybean oil contract on the Dalian Commodity Exchange declined 1.9%.
Malaysian palm oil futures fell on Friday, after climbing to a two-week high in the prior session, although expectations of strong demand for the vegetable oil kept a floor under prices.
The benchmark palm oil contract on the Bursa Malaysia Derivatives Exchange closed down 1.5% to 2,317 ringgit (US$571.6) a tonne. On Thursday, it climbed to 2,368 ringgit, highest since July 5. Volumes stood at 32,734 by close.
"We are seeing some chart-related selling at current levels, as bargain hunting and short covering start to fade," said one Kuala Lumpur-based trader, adding though that export sales are expected to remain strong.
Exports of Malaysian palm oil products for July 1-20 rose 14% from a month earlier, data from cargo surveyor Intertek Testing Services showed, while Societe General de Surveillance reported export growth of 15.3%.
The market is awaiting the next update on export demand from cargo surveyors due on Monday.
"Bullish fundamentals and a weaker ringgit will cushion any attempt to sell," the Kuala Lumpur trader said.
This week, the ringgit has slipped almost 3%, its biggest such loss in 10 months, making palm oil cheaper for holders of other currencies.
Palm oil futures have risen 1.7% for the week — their second straight week of gains — with a drop in soybean prices failing to dent the bullish sentiment in palm oil.
"Palm is still the cheapest edible oil in the market," the trader said, adding that palm olein is being quoted US$80 a tonne below soybean oil in Argentina for August shipment.
While Chicago soybeans have lost 6% this week, soyoil is set to end the week down about half a percent.
Palm oil may drop to a support at 2,302 ringgit, as it failed to break a resistance at 2,374 ringgit, said a Reuters analyst for commodities and energy technicals.
The most actively-traded contract for palm olein on the Dalian Commodity Exchange gave up 3%, while Dalian soybean oil dropped 2%.
Malaysian palm oil futures extended gains on Thursday, climbing to the highest in more than two weeks with prices underpinned by strong demand of the vegetable oil.
A weaker Malaysian ringgit, which makes palm oil cheaper for importers holding other currencies, also fuelled gains in prices of the tropical oil, traders said.
The benchmark palm oil contract on the Bursa Malaysia Derivatives Exchange closed up 0.3% at 2,353 ringgit (US$582.70) a tonne.
Earlier in the session, it climbed to 2,368 ringgit, highest since July 5. Traded volumes stood at 38,766 lots.
"With better demand seen in July and August, prices will continue to rise," said one Kuala Lumpur-based trader.
"We anticipate prices to surge, with 2,500 ringgit as the near-term target," the trader added.
Indicating firmer demand, exports of Malaysian palm oil products for July 1-20 rose 14% from a month earlier, data from cargo surveyor Intertek Testing Services showed, while Societe General de Surveillance reported export growth at 15.3%.
Palm oil prices have risen this week after plumbing a 10-month low last week. The weak Malaysian ringgit, in which palm oil is priced and which helped to lift the market, lost more ground on Thursday and hit its lowest in three weeks.
Still, there could be some headwinds for palm oil from the weakness in Chicago soybean futures, which have lost more than 10% over the last three weeks.
Palm oil and soybean oil compete for a share of the global vegetable oil market.
On the technical front, palm oil may end its current bounce around a resistance at 2,374 ringgit, according to Wang Tao is a Reuters analyst.
The most actively-traded contract for palm olein on the Dalian Commodity Exchange finished almost unchanged, while Dalian soybean oil added 0.6%.