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VEGOILS-Palm oil eases, but investors bullish on smaller output hopes
November 18, 2013 / 5:26 AM / in 4 years

VEGOILS-Palm oil eases, but investors bullish on smaller output hopes

(Updates prices, adds graph and bullet on ringgit)
    * Weak production in Q1 2014 could push prices to
2,700-2,800 rgt level -trader
    * Palm oil to test support at 2,565 ringgit -technicals
    * Ringgit gains 0.45 pct to 3.1880 late Monday

    By Anuradha Raghu
    KUALA LUMPUR, Nov 18 (Reuters) - Malaysian palm oil futures
ended lower on Monday as traders booked profits after strong
gains last week, but the prospect of seasonally weaker output in
the world's top producers, Indonesia and Malaysia, buoyed
    Palm oil prices soared 4.1 percent last week, fuelled by
fears that super typhoon Haiyan had caused severe damage to
coconut crops in the Philippines, disrupting coconut oil supply
from the world's biggest exporter and shifting demand to
palm-based substitutes. 
    "Prices have gone up too fast and it's only proper that the
market consolidates," said a trader with a local commodities
    "But since we don't see a major pick up in production,
investors are taking a very bullish stance, especially as we get
into the first quarter of the year - where production always
dips," the Malaysia-based trader said.
    "Based on this, after all this consolidation, the market
will gradually go close to 2,700 ringgit, maybe even 2,800
ringgit in the first quarter of 2014."      
    By Monday's close, the benchmark February contract 
on the Bursa Malaysia Derivatives Exchange had fallen 0.9
percent to 2,590 ringgit ($814) per tonne. Prices were stuck in
a range of 2,577-2,597 ringgit. 
    Total traded volume stood at 42,523 lots of 25 tonnes each,
much higher than the average 35,000 lots.
    A stronger ringgit also weighed on prices. The Malaysian
currency gained 0.45 percent to 3.1880 against the
greenback late Monday, making the ringgit-priced feedstock more
expensive for overseas buyers. 
    Palm's export demand will also be in focus in November and
December. Demand typically softens as countries in the northern
hemisphere approach winter and buyers cut back purchases of the
tropical oil that solidifies in cold temperatures. 
    But investors are hoping that China, the world's second
largest palm oil buyer, will continue to import palm as buyers
re-stock ahead of the start of the Lunar New Year festival in
    Technicals showed that Malaysian palm oil is expected to
test support at 2,565 ringgit per tonne, with a good chance of
breaking this level and falling towards 2,506 ringgit, said
Reuters market analyst Wang Tao.   
    In other markets, Brent crude dropped below $108 a barrel on
Monday as traders focused on a surge in Saudi exports in the
third quarter, while hopes that a resumption of talks between
sanctions-hit Iran and major powers may lead to more oil supply
also weighed.       
    In competing vegetable oil markets, the U.S. soyoil contract
for December was flat in late Asian trade. The most
active May soybean oil contract on the Dalian
Commodities Exchange fell 1.5 percent.  
  Palm, soy and crude oil prices at 1006 GMT
  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      DEC3    2585   -29.00    2573    2593     239
  MY PALM OIL      JAN4    2591   -22.00    2577    2597    9968
  MY PALM OIL      FEB4    2590   -24.00    2577    2597   17371
  CHINA PALM OLEIN MAY4    6242   -62.00    6236    6282  517320
  CHINA SOYOIL     MAY4    7178  -108.00    7174    7228  729808
  CBOT SOY OIL     DEC3   40.46    -0.01   40.37   40.75    5748
  NYMEX CRUDE      DEC3   93.53    -0.31   93.35   93.84    9223
  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 = 3.18 Malaysian ringgit)

 (Editing by Joseph Radford and Subhranshu Sahu)

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