Malaysian palm oil futures rose on Thursday due to weakness in the 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 FCPOc3 for August delivery on the Bursa Malaysia Derivatives Exchange closed up 24 ringgit, or 0.62%, at 3,892 ringgit ($827.73) a metric ton.
The drop in the Malaysian ringgit and a rise U.S. soyoil futures provided support to the market, said a Mumbai-based trader.
The Malaysian ringgit MYR=, palm’s currency of trade, weakened 0.26% against the dollar. A weaker ringgit makes palm oil more attractive for foreign currency holders.
U.S. soybean oil futures BOc2 were up 0.43% on Thursday morning.
“Palm oil exports had been falling since the oil was more expensive for buyers than soyoil and sunflower oil. However, now that it is trading at a discount, exports are likely to pick up,” the trader said.
Malaysian palm oil exports for May 1-20 fell between 8.3% and 9.6% from the month before, according to cargo surveyors.
Malaysia’s palm oil production is gaining momentum and there is a need to accelerate exports to avoid a further buildup in stocks, said a Kuala Lumpur-based trader.
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, the industry regulator said earlier this month.
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, according to Reuters’ technical analyst Wang Tao.