Crude palm oil futures on Malaysia's derivatives exchange ended higher Wednesday, buoyed by technicals-driven buying interest, although further gains are likely to be capped by rising supplies.
The benchmark January contract at Bursa Malaysia Derivatives ended 1.1% higher at 2,397 ringgits a metric ton.
Palm oil also rose along with other commodities, boosted by news of U.S. President Barack Obama's re-election, although analysts said the impact of the election news will likely be short-lived.
"From what we see, it is more of a knee-jerk reaction, as investors are likely to start worrying about the fiscal cliff" of spending cuts and tax increase scheduled to kick in early next year in the U.S., unless Congress moves to stop them, Ker Chung Yang, a senior investment analyst at Singapore-based Phillip Futures, said.
Investors will now turn their attention to China's Party Congress, which begins Thursday, and upcoming crop reports from the U.S. Department of Agriculture and the Malaysian Palm Oil Board.
Inventories in Malaysia rose to a all-time high of 2.48 millions in September. Stockpiles are widely tipped to have hit another record in October, around 2.70 million-2.82 million tons, as production outpaced export demand.
Leading vegoil analyst Dorab Mistry said in October that palm oil stock levels could reach or surpass 3 million tons by early January, as prices haven't dipped to a level attractive enough to biodiesel producers.
Palm oil is the most consumed vegetable oil and is used in to make a wide variety of consumer products and as feedstock for biodiesel.
Still, some industry players expect palm oil shipments to surge by the end of December, as exporters with overseas refineries are moving more cargoes before a duty-free CPO export quota is discontinued.
"The oil palm crop will see a bigger drop in December and [Malaysian] stockpiles could come down to 2.7 million-2.8 million tons [by then] should exporters use up the existing 5 million tons duty-free CPO quota by December," a company executive at a major plantation firm said.
In the cash market, refined palm olein for November was offered $10 higher at $805/ton, while cash CPO for prompt shipment was offered unchanged at MYR2,300/ton.
Open interest on the BMD was 134,091 lots versus 134,723 lots Tuesday. One lot is equivalent to 25 tons.
A total of 43,064 lots of CPO were traded versus 34,020 lots Tuesday.
Ending BMD CPO futures prices in MYR/ton: Month Close Previous Change High Low Nov'12 2,290 2,280 +10 2,310 2,300 Dec'12 2,330 2,325 +5 2,367 2,312 Jan'13 2,397 2,372 +25 2,420 2,364 Feb'13 2,450 2,425 +25 2,461 2,410