Malaysian palm oil experiences a rise due to increased demand
Malaysian palm oil futures experienced a significant increase on Wednesday, driven by a combination of positive factors and favourable market conditions.
The rise, which marked a reversal of two consecutive sessions of losses, was primarily supported by higher demand and strengthened rival vegetable oil markets. Cargo surveyors reported a 4.3% to 4.7% increase in June exports compared to the previous month, boosting sentiment in the industry.
Strengthening rival Dalian oils, including soyoil and sunflower oil, also helped support the rise, indicating favourable conditions in related markets that influenced palm oil prices positively. The Dalian's most-active soyoil contract rose by 0.63%, while Soyoil prices on the Chicago Board of Trade increased by 1.12%. Dalian's palm oil contract gained 1.52%.
India's palm oil imports reached an 11-month high in June, driven by lower domestic inventories, further bolstering the demand for Malaysian palm oil.
However, further gains were somewhat limited by weaker crude oil prices and a slightly stronger Malaysian ringgit, as well as cautious outlooks due to slower growth in China's services activity and ongoing trade uncertainties.
Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari, stated that overall market sentiment has improved and demand has returned to normalcy. He attributed the preliminary assessment on lower production in June and the soyoil rally to the palm prices remaining competitive.
The closing price represented a 95 ringgit, or 2.39%, increase, with the benchmark palm oil contract for September delivery closing at 4,063 ringgit ($961.4) a metric ton. The weakening of the ringgit against the dollar also made palm oil cheaper for buyers holding foreign currencies.
In conclusion, the increase in Malaysian palm oil futures on Wednesday was driven by stronger rival vegetable oil markets, higher export volumes, improved global trade sentiment, increased demand signals, and the soyoil rally, while some headwinds capped the gains.
The rise in Malaysian palm oil futures was also influenced by strengthening finance markets, as indicated by the increase in soyoil and sunflower oil prices on different exchanges, such as the Dalian and Chicago Board of Trade. Additionally, the increase in palm oil exports and the competition brought about by the soyoil rally suggest a positive trend for the energy sector, including the palm oil industry.
