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(May 17): Malaysian benchmark palm oil futures rose on Tuesday, overcoming a stronger ringgit, as demand for the tropical oil ahead of the Muslim festival of Ramadan pushed up prices.
Demand for palm oil usually comes in one to two months before Ramadan, which begins in early June this year. The Muslim festival is a month of fasting and feasting, which sees higher demand for palm oil used in cooking, leading up to Eid.
The new palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange was 0.5% higher at RM2,600 (US$647) per tonne in the evening.
Traded volumes stood at 49,902 lots of 25 tonnes each at closing trade, above the 2015 daily average of 44,600.
"Although the ringgit is stronger today, the market is covering for May and June as Ramadan demand is there," said a Kuala Lumpur-based trader.
The Malaysian ringgit rose as crude oil futures held near six-week highs, easing concerns over the country's falling gas and oil revenues. A stronger ringgit, the currency in which palm oil is traded, typically makes it more expensive to buy for foreign currency holders.
"Everyone wants to rush the shipments before Eid. The half a percent rise (in crude palm oil export tax) won't make much of an impact, it's very marginal," the trader said.
Malaysia its raised export tax on crude palm oil to 5.5% for June, a government circular showed on Tuesday. The world's second largest palm oil producer set the export tax at 5% for April and May.
Palm oil shipments rose 14%-16% in the first half of May compared with the same time period a month ago, according to data from cargo surveyors, lifted by rising demand from Europe, Pakistan and India.
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