Crude Palm Oil Futures End Down In Thin Trade; Output, Stocks Weigh 11 Nov 2009

BMD Crude Palm Oil Futures
Crude palm oil futures on Malaysia's derivatives exchange ended lower Wednesday in thin trade as news of bearish output and stock levels continued to weigh on prices, said trade participants.

However, CPO prices performed better than expected amid the slew of bearish cues, leaving some participants wondering if a bigger downward price correction lies ahead.

The benchmark January contract on the Bursa Malaysia Derivatives ended MYR7 lower at MYR2,235 a metric ton after trading in a range of MYR2,225-MYR2,260.

Traders said the market should be trading lower on bearish production and stocks data released yesterday, but losses have so far been minimal.

"It could be that the market is well-balanced with buyers and sellers not too long or short on their positions and don't need to hedge their positions much," said a Singapore-based trader.

Others said the thin volume of trade and a lack of buyers in the market could indicate participants are uncertain of the direction that prices should take.

"Participants just weren't making significant moves either way, so prices just inched along sluggishly," said a Kuala Lumpur-based trader.

Malaysia's October palm oil output rose 27% compared with September to 1.99 million tons, the highest monthly output on record, said the Malaysian Palm Oil Board yesterday.

Palm oil stocks rose 25% on month to a 10-month high of 1.98 million tons at the end of October.

The October stock level was well above market expectations of being in a range of 1.75 million to 1.80 million tons.

Although the news was bearish, prices fell by only MYR24 yesterday.

"Prices didn't fall by that much today either, and trade was very thin, so many are wondering if a (downward) price correction lies ahead," said another Kuala Lumpur-based trader.

Cash palm olein for January/February/March was offered at $700/ton.
Cash CPO for prompt shipment was offered MYR10 lower at MYR2,170/ton.
A total of 5,092 lots of CPO were traded on the BMD, versus 11,963 lots Tuesday.
Open interest stood at 95,142 lots Wednesday, up from 94,207 lots. One lot is equivalent to 25 tons.