Malaysian palm oil rises

KUALA LUMPUR, Oct 28 (Reuters): Malaysian palm oil futures rose to a near-three-week high on Tuesday on a bout of technical buying, traders said, while plans to increase the use of palm oil in biodiesel by the world's No.2 grower received a lukewarm response from market players.
The benchmark January contract on the Bursa Malaysia Derivatives Exchange rose to 2,216 ringgit in late trade, the highest since Oct, 9, before ending up 2.1 percent to 2,212 ringgit ($676) per tonne by the day's close.
"Technical buying is keeping the market on the supportive side after some mild correction yesterday," said a trader with a foreign commodities brokerage in Kuala Lumpur.
Total traded volume stood at 51,423 lots of 25 tonnes, above the usual 35,000 lots.   
Malaysia, the world's second-largest palm producer, on Tuesday said it would increase the amount of palm oil in biodiesel to 7 percent from November onwards, up from 5 percent now.
The "B7" biodiesel mandate, targeted to be fully implemented nationwide by December this year, is expected to boost the domestic use of biodiesel to 575,000 tonnes a year, Malaysia's plantation industries and commodities minister said.
Crude palm oil is increasingly being used as a "green" additive to fossil fuels as it can reduce costs and cut environmentally damaging emissions.
"The news is friendly to planters - it will help attract interest from biodiesel producers and is supportive to the market in the long term," the trader added.
But market players will be looking to see whether the B7 biodiesel programme will eat into stockpiles of palm - which rose to an 18-month high of 2.09 million tonnes at end-September- and support prices which have dropped nearly 20 percent this year.
"There are still many things that are unknown, so even if everything comes into play, it will still have a minimum impact on prices," said a second Kuala Lumpur-based dealer. "We need to quantify how much palm is actually being used."
Technicals showed that palm oil looks neutral in a range of 2,164-2,195 ringgit per tonne, with any escape pointing its likely direction, said Reuters market analyst Wang Tao.