Malaysian palm oil futures eased on Friday as profit-taking stretched into a second day and a stronger ringgit weighed, but hopes of only a mild rise in stocks capped losses and prices were on track for a second weekly rise.
Prices hit their highest in more than five weeks on Thursday on optimism that output volumes in Malaysia, the world's second-largest producer, may not surge as much as earlier expected, prompting investors to book profits.
The strong ringgit, which gained 0.9 per cent this week, also dragged on the palm market as it made the feedstock more expensive for overseas buyers. The ringgit climbed along other emerging Asian currencies after the US sealed a deal to avoid a debt default.
But traders say the palm market is robust on prospects of a meek rise in production growth in October, which along with robust demand could keep stocks below two million tonnes in 2013.
"There's some pressure coming in from the strong ringgit — but the current level shows the market is quite resilient. It might try to go up to RM2,450," said a trader with a foreign commodities brokerage in Kuala Lumpur.
"Stocks could stay below 2 million tonnes this year. Output will peak next month, but it will be a very minimal rise," the trader added.
By the mid-day break, the benchmark January contract on the Bursa Malaysia Derivatives Exchange had eased 0.1 per cent to RM2,395 (US$760) per tonne. Prices traded in a range between RM2,378-RM2,404.
Total traded volume stood at 10,898 lots of 25 tonnes each, slightly lower than the usual 12,500 lots.
Palm oil prices have risen 3.2 per cent so far in October and are on track to post a weekly gain of 0.6 per cent, supported by healthy demand.
Cargo surveyor data showed that exports of Malaysian palm oil in the first half of October rose to 781,043-799,853 tonnes, about 7-12 per cent higher compared to a month ago as purchases from Europe and China increased.
"China won't stop importing palm because they are very price-sensitive. The price spread between soy and palm is still in favour of palm," the trader added. Palm olein's discount to soyoil is currently around US$119.
Market players will be waiting for export data for the October 1-20 period, due on October 21, to gauge demand.
Technicals were a little bearish. Malaysian palm oil may break support at RM2,365 and fall further to RM2,346 per tonne, as indicated by a Fibonacci retracement analysis, Reuters market analyst Wang Tao said.
In other markets, Brent futures rose on Friday, holding above US$109 a barrel as data showing China's economy grew at the fastest pace this year in the third quarter helped offset demand concerns after a rise in US crude stockpiles.
In competing vegetable oil markets, the US soyoil contract for December rose 0.3 per cent in early Asian trade. The most-active January soybean oil contract on the Dalian Commodities Exchange fell 0.1 per cent
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