VEGOILS-Palm posts biggest weekly loss in 2-1/2 mths on fears of output rise

Reuters

* Palm on track to post worst weekly performance since

end-June

* Higher output could lift stocks in September -trader

* Palm oil neutral in 2,323-2,361 ringgit range -technicals

(Updates prices, recasts lead)

By Anuradha Raghu

KUALA LUMPUR, Sept 13 (Reuters) - Malaysian palm oil futures

edged up on Friday, as buying interest surged after prices fell

to the lowest in more than three weeks, although fears remained

that stocks of the tropical oil would surge.

Despite the gain, palm oil futures still posted their worst

weekly performance in more than two months after forecasts of

rising output in Southeast Asia raised concerns over rising

inventory levels.

Traders and analysts warn that inventory levels in Malaysia,

the world's No.2 producer, may climb higher from September

onwards as steadily higher production outweigh exports.

Investors also turned bearish after leading industry analyst

Dorab Mistry said Indonesia and Malaysia will seasonally produce

more palm oil until at least until April 2014. Mistry said this

would add to the supply of competing oilseeds and drag palm

prices to new lows in January.

"We're moving into the high production period. People are

foreseeing that output will go up in September, followed by a

rise in the end-stocks," said a trader with a foreign

commodities brokerage.

"It has put a damper on the market. I'm looking at a range

of 2,300-2,370 ringgit for the next 1-2 days."

The benchmark November contract on the Bursa

Malaysia Derivatives Exchange gained 0.2 percent to close at

2,349 ringgit ($715) per tonne on Friday, recovering from its

intraday low at 2,306 ringgit, a level unseen since Aug. 20.

Prices for the week have dropped 3.9 percent, posting their

worst weekly performance since end-June.

Total traded volumes stood at 30,848 lots of 25 tonnes each,

below the average 35,000 lots.

Technicals showed palm oil looks neutral in a range of

2,323-2,361 ringgit per tonne, and an escape will indicate a

direction, says Reuters market analyst Wang Tao.

Malaysian palm oil stocks at end-August stood at 1.67

million tonnes, almost flat from the 1.66 million tonnes at

end-July, as healthy consumption for festivals such as the

Muslim Eid al-Fitr and China's Mid-Autumn celebrations offset an

increase in output.

Traders, however, say export demand may dwindle now that the

festive season is over.

Cargo surveyors will release export data for the first 15

days of September next Tuesday. Malaysian markets will be closed

on Monday for the Malaysia Day holiday.

In other markets, Brent crude oil fell below $112 a barrel

on Friday as the U.S. and Russian foreign ministers met in

Geneva to work out a deal to avert a Western military strike on

Syria, easing fears of a wider war in the Middle East.

In vegetable oil markets, the U.S. soyoil contract for

December fell 0.3 percent in late Asian trade. The

most-active January soybean oil contract on the Dalian

Commodities Exchange edged down 0.4 percent.

Palm, soy and crude oil prices at 1008 GMT

Contract Month Last Change Low High Volume

MY PALM OIL SEP3 0 +0.00 0 0 0

MY PALM OIL OCT3 2361 +10.00 2320 2365 801

MY PALM OIL NOV3 2349 +5.00 2306 2361 15900

CHINA PALM OLEIN JAN4 5470 -32.00 5446 5580 528066

CHINA SOYOIL JAN4 7196 -28.00 7172 7304 880074

CBOT SOY OIL DEC3 42.87 -0.16 42.76 43.29 7082

NYMEX CRUDE OCT3 107.57 -1.03 107.31 108.74 18436

Palm oil prices in Malaysian ringgit per tonne

CBOT soy oil in U.S. cents per pound

Dalian soy oil and RBD palm olein in Chinese yuan per tonne

Crude in U.S. dollars per barrel

($1=3.287 Malaysian ringgit)

(Additional reporting by Chew Yee Kiat; Editing by Tom Hogue

and Jijo Jacob)

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