Malaysian palm oil futures rose on Thursday, driven by a weakening Malaysian ringgit and expectations of improved demand as the tropical oil started trading at a discount to rival soft oils.
The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange closed up 24 ringgit, or 0.62%, at 3,892 ringgit ($827.73) per metric ton.
The drop in the value of the Malaysian ringgit, which is the currency of trade for palm oil, and a rise in U.S. soyoil futures provided support to the palm oil market, according to a Mumbai-based trader. The Malaysian ringgit weakened 0.26% against the U.S. dollar, making palm oil more attractive for foreign buyers.
The trader also noted that palm oil exports had been falling as the commodity was more expensive for buyers than soyoil and sunflower oil. However, now that palm oil is trading at a discount, exports are expected to pick up.
Malaysian palm oil exports for the period of May 1-20 fell between 8.3% and 9.6% from the previous month, according to cargo surveyors.
A Kuala Lumpur-based trader stated that Malaysia’s palm oil production is gaining momentum, and there is a need to accelerate exports to avoid a further buildup in stocks. Malaysia’s palm oil stocks increased at the end of April for the first time in six months, as production jumped despite a drop in exports, according to the industry regulator.
The trader added that palm oil may fall into a range of 3,812-3,832 ringgit per metric ton, as the first bounce from 3,767 ringgit has completed.