Friday 29 Mar 2024
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KUALA LUMPUR (Feb 9): Malaysian palm oil futures stretched gains into a fifth day on Monday, with investors taking more bullish positions after Indonesia approved a near-threefold rise in biodiesel subsidies that will boost use of the tropical oil by its top producer.

The higher subsidies of 4,000 rupiah per litre, from 1,500 rupiah now, may be implemented as soon as March and will translate to more palm blended into biofuel to feed the country's targeted 17.05 million kilolitres diesel consumption this year.

After recording its biggest weekly gain in six years, the benchmark palm contract has now garnered a more supportive outlook, traders said.

"People are a bit more friendly on the market - there's no more talking about 2,200-2,250 ringgit anymore," said one trader with a foreign commodities brokerage in Kuala Lumpur.

"We have moved to a new level and people are coming to terms with the new demand that the biodiesel plan is creating."

By the midday break, the benchmark April contract  had edged up 0.2 percent to 2,350 ringgit ($660) per tonne. Prices in early trade briefly touched 2,357 ringgit, their highest since Jan. 15.

Total traded volume stood at 24,525 lots of 25 tonnes, nearly double the usual 12,500 lots.

Analysts said palm prices will likely continue to rise in the next few months as the higher subsidies soak up Indonesian palm inventories, at a time when supplies from No.2 grower Malaysia are expected to be tight due to unfavourable weather.

"The biodiesel subsidy hike certainly gives a boost to the Indonesian plantation sector as it will help double the domestic palm oil demand for biodiesel to about 1.7 million metric tonnes from 800,000 metric tonnes last year," Public Investment Bank said in a Monday note.

"It will also partly help ease Indonesia's mounting inventories that currently stand at an estimated 2.45 million metric tonnes last year."

Market players are also watching for key industry data on Malaysia's January end-stocks which the Malaysian Palm Oil Board will release on Tuesday.

A Reuters survey pegged inventories to drop to a six-month low of 1.77 million tonnes, after flooding in the Borneo region and seasonally weak yields reduced output to the lowest level
since February 2011.

Growers body, the Malaysian Palm Oil Association, estimates that January production fell 17.1 percent to 1.13 million tonnes.

In other markets, oil prices steadied on Monday as falling U.S. oil rig counts and signs of strong U.S. economic growth were balanced by a slump in Chinese imports, pointing to lower fuel demand in the world biggest energy consumer.  

 

                                  
                                 

 

 

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