(May 27): Malaysian palm oil futures fell at closing trade on Friday evening, weighed down by a stronger ringgit which triggered some selling, but recorded its first weekly gain in three on expectations of lower-than-expected output and steady Ramadan demand.
The ringgit hit 4.0600 per dollar earlier in the day, its strongest level in more than a week, before settling at 4.0760 on Friday evening.
A stronger ringgit, the currency of trade for palm oil, makes it cheaper for holders of foreign currencies.
The palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange declined 0.8% to reach RM2,558 (US$628) per tonne in the evening, after hitting an intraday low of RM2,555.
Palm has gained for three out of five sessions so far this week and was up 2% on the week, on track for its first weekly gain in three weeks.
It rose 1.4% on Thursday.
Traded volumes stood at 51,908 lots of 25 tonnes each on Friday evening, compared with a 2015 daily average of 44,600.
"The ringgit was stronger in the morning, which started some profit-taking," a trader from Kuala Lumpur said.
"Not helping is the demand side; we are sitting in the month for Ramadan demand now but not seeing much activity."
Another trader added that the market likely fell on technical selling triggered by the stronger ringgit.
Demand for palm oil usually comes in one to two months before Ramadan, which begins in early June this year. The Muslim holy season is a month of fasting and feasting, which sees higher demand for palm oil used in cooking.
Leading up to Ramadan, Malaysian palm oil shipments have gained 8%–11% over May 1–25 from last month, according to cargo surveyor data.
Better demand for palm oil and lower-than-expected output are expected to dent current stockpile levels, supporting benchmark prices
(May 26): Malaysian palm oil futures rose on Thursday to record a third session of gains this week, amid expectations of slow output growth and sustained Ramadan demand.
The palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange rose 1.4% to RM2,579 (US$632) per tonne in the evening. It earlier reached an intra-day high of RM2,595, its highest in a week.
Palm suffered losses in the last two weeks, impacted by the sell-off in China's commodities markets and hitting a near three-month low on Monday, tracking weak rival Chinese oils.
Traded volumes stood at 45,999 lots of 25 tonnes each at the close of trade, compared with a 2015 daily average of 44,600.
"Production is not going up drastically, and we have seen some growth in demand, which will continue in June," said a trader from Kuala Lumpur.
"While peak demand is a month before Ramadan, it will stay on until mid June."
Better demand for palm oil and lower-than-expected output will dent current stockpile levels, helping to support benchmark prices. Malaysia's palm oil inventories stood at 1.8 million tonnes at the end of April.
While a dry weather El Nino is seen impacting output in top producers Indonesia and Malaysia, an impending La Nina, which brings wet weather across Asia, could reverse the trend. Palm oil production is also set to rise this quarter in line with the seasonal trend.
(May 25): Malaysian palm oil futures rose for a second consecutive day, making their sharpest gains in three weeks and outpacing a stronger ringgit as they track improving rival oils in China.
The ringgit, in which palm oil is traded, strengthened 0.5% to reach 4.1010 against the dollar in the evening, making palm more expensive for foreign currency holders.
Palm prices had earlier recorded two weeks of losses tracking China's commodities sell-off.
The palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange gained 1.7% to RM2,545 (US$620) per tonne at the closing trade, after reaching an intraday high of RM2,547.
Traded volumes stood at 48,464 lots of 25 tonnes each on Wednesday evening, versus a 2015 daily average of 44,600.
"The market most likely rebounded on an oversold situation... And the Chinese markets have stopped dropping," said a trader in Kuala Lumpur, referring to palm's rival vegetable oils on the Dalian Commodity Exchange.
"We may see a buy off tomorrow as most of the Chinese market is up."
Malaysian palm oil shipments rose 8%–11% over May 1–25 compared with the previous month, according to data from cargo surveyors on Wednesday, but traders say double-digit monthly growth is required to support benchmark prices.
"Post Ramadan the market will come down, we really need strong demand then because we will see strong production from June to August," said another trader from Kuala Lumpur.
(May 24): Malaysian palm oil futures recovered from the previous session's near three-month low on Tuesday, supported by a weaker ringgit while gains in rival oils also boosted sentiment.
The contract for August delivery on the Bursa Malaysia Derivatives Exchange had risen 0.4% to 2,503 ringgit (US$608) per tonne at the end of the trading day. It hit its lowest level since March 3 on Monday, dragged down by losses in Chinese vegetable oils.
Traded volume stood at 30,536 lots of 25 tonnes each on Tuesday evening, lower than the 2015 daily average of 44,600.
"The U.S. dollar has strengthened, and markets have recovered a bit on the Dalian," said a trader from Kuala Lumpur, referring to the Dalian Commodity Exchange.
"Nearby tightness on supply also created some buying."
The ringgit lost as much as 1.1% to 4.1290 per dollar, its weakest since March 16, as most Malaysian government bond prices slipped. The currency was down 0.9% at 4.1200 per dollar in the evening, making palm oil cheaper for holders of foreign currencies.
Better performing rival oils on the Dalian Commodity Exchange also boosted prices of Malaysian palm. The most actively traded September contract for palm olein gained 0.4%, while the September soybean oil contract rose 0.3%.
Expectations of lower output in May and early June, due to the impact from a crop-damaging El Nino weather event, also lent support to palm, said the Kuala Lumpur-based trader.
The Australian Bureau of Meteorology said that the strongest El Nino in nearly 20 years that persisted through 2016 is now over.