Palm oil gains 4% as Asian buyers ramp up purchases

July 20, 2022: Malaysian palm oil futures jumped more than 4% on Wednesday, recovering from losses posted in the previous session, as the recent slump in prices spurred fresh demand from Asian buyers.

The benchmark palm oil contract FCPOc3 for October delivery on the Bursa Malaysia Derivatives gained 161 ringgit, or 4.22%, to 3,973 ringgit ($892.61) during early trade.

FUNDAMENTALS

Asian buyers are ramping up palm oil purchases to replenish inventories after prices corrected to their lowest in a year and as the top producer, Indonesia has scrapped levies on exports. 

Malaysia has maintained its August export tax for crude palm oil at 8% and lowered its reference price, a Malaysian Palm Oil Board circular showed on Tuesday. 

The world's second-largest producer is losing around 57,880 tonnes of palm oil fruit each day, or 1.5 million tonnes per month, due to an acute shortage of labor, the commodities ministry said on Tuesday. 

Dalian's most-active soyoil contract DBYcv1 rose 0.7% while its palm oil contract DCPcv1 gained 2.1%. Soyoil prices on the Chicago Board of Trade BOcv1 were down 0.2%.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

Palm oil still targets 4,246 ringgit per tonne, as a five-wave cycle from 6,698 ringgit has been completed, Reuters technical analyst Wang Tao said. 

MARKET NEWS

Asian shares extended a global rally on Wednesday as strong U.S. corporate earnings and the expected resumption of Russian gas supply to Europe helped lift sentiment and ease fears of a recession, while the dollar was mired near two-week lows.

Reuters