Malaysian CPO futures advanced for the first time in 3 days on speculation this week's price decline will boost demand and a rally in crude oil may raise the appeal for the commodity as an alternative fuel. Palm oil for Nov delivery added as much as 2.6% to 2,515 ringgit (US$734) a tonne on BMD before closing at 2,510 ringgit.
"It's a technical correction in the palm oil market" after recent declines, Merlissa Baramitha, an analyst with PT Mandiri Sekuritas in Jakarta, said.
The futures contract has tumbled 45% from a record 4,486 ringgit on Mar 4 amid concerns that global supply may exceed demand and as funds cut commodity investments.
Palm oil prices may rebound 30-40% over the next 6 months on rising biofuel demand and slowing production, boosting shares of Wilmar International and Malaysia's IOI Corp., Goldman Sachs said.
"Near-term crude palm oil fundamentals are bearish, due to high inventory levels in Malaysia, but we believe this is already priced in,'' with rates at a 40% discount to soybean oil, Goldman analysts Patrick Tiah and Nikhil Bhandari said today in a report. That's twice the long-term average discount of 20%.
"My expectation is for palm oil futures by the end of Dec to be trading between 2,700 and 2,900 ringgit because of strong demand and tighter supplies,'' Thomas Mielke, chief editor of OilWorld said an interview today at a conference in Siem Reap, Cambodia.
Meantime, Bursa Malaysia Bhd. said it will start offering U.S. dollar-denominated palm oil futures contracts tomorrow. The contract, called FUPO, will be cash-settled, the exchange said.
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