Oil Rises as Dollar Drop Spurs Investor Demand for Commodities

May 22 (Bloomberg) -- Crude oil rose in New York, poised for a 9.1 percent gain this week, as investors bought commodity futures as a hedge against inflation as the dollar fell to a four-month low against the euro.

The dollar declined on speculation the U.S. government’s creditworthiness is weakening, sapping demand for the currency. Oil also climbed after an index of leading U.S. economic indicators rose 1 percent April, raising expectations of improved fuel demand.

“The trend is still to the upside,” said Jonathan Kornafel, a director for Asia at options traders Hudson Capital Energy in Singapore. “With the weakness in the dollar you don’t have a lot of other places for money to go so I think prices will push higher.”

Crude oil for July delivery rose as much as 68 cents, or 1.1 percent, to $61.73 a barrel in electronic trading on the New York Mercantile Exchange. It was at $61.52 a barrel at 3:15 p.m. in Singapore.

Yesterday, the contract declined 99 cents, or 1.6 percent, to settle at $61.05 a barrel. The oil price dropped along with equities, with the Standard & Poor’s 500 Index slipping 1.7 percent and the Dow Jones Industrial Average sinking 1.5 percent.

Demand for commodities as an alternative investment increases as the dollar drops as oil and gold hold their value against the falling currency. The dollar declined to $1.3930 per euro as of 12:45 p.m. in Tokyo, after reaching $1.3955, the lowest since Jan. 5. Crude oil’s price has an 80 percent correlation with the decline in the dollar against the euro since the beginning of the year, according to Bloomberg data.

‘Underweight Oil’

“You’ve still got some funds that are underweight oil and as the price rallies, they start to panic and they buy in and push the price up even more,” said Hudson Capital’s Kornafel.

The Organization of Petroleum Exporting Countries may keep output quotas unchanged for a second time this year as recovering oil prices forestall the need for new supply cuts, according to a Bloomberg survey. The group will maintain a production target of 24.845 million barrels a day when it meets May 28, according to 25 of 27 analysts surveyed.

“The global economy isn’t very good right now and that is not a situation for OPEC to cut production,” said Ken Hasegawa, a commodity derivative sales manager at brokers Newedge in Tokyo. “They have to keep the levels at the moment.”

OPEC agreed last year to three production cuts to bolster prices.

Nigeria Output

Nigeria’s oil production has fallen to less than half its capacity as fighting against rebels in the Niger River delta escalates.

The West African nation, formerly the continent’s biggest producer, now pumps about 1.6 million barrels a day, compared with capacity of 3.2 million, Petroleum Minister of State Odein Ajumogobia said yesterday.

“This kind of situation is not that special,” said Newedge’s Hasegawa. “This is the same issue that’s been there and it’s always supportive.”

Brent crude for July settlement rose as much as 71 cents, or 1.2 percent, to $60.64 a barrel on London’s ICE Futures Europe exchange. It was at $60.45 a barrel at 3:16 p.m. Singapore time.

Crude oil futures may decline as the global economic contraction reduces fuel demand in the U.S., Europe and Japan.

Fifteen of 36 analysts surveyed by Bloomberg News, or 42 percent, said futures will fall through May 29. Fourteen respondents, or 39 percent, forecast that oil prices will rise and seven said the market will be little changed. Last week, 60 percent of analysts said prices would decline.

Investigators of the fire at Sunoco Inc.’s Marcus Hook, Pennsylvania, refinery on May 17 couldn’t fully access the site because of safety issues as operations are at reduced rates.

The cat cracker remains shut and crude units are “still at reduced rates,” Thomas Golembeski, a Sunoco spokesman, said in an e-mail yesterday.

Soybeans Set for Fourth Weekly Advance on Demand for U.S. Crop

May 22 (Bloomberg) -- Soybeans headed for a fourth weekly gain on improved demand prospects for the U.S. crop amid declining output in South America. Corn and wheat also climbed.

The oilseed is up 4.2 percent this week and touched $11.895 on May 20, the highest since Sept. 26. U.S. exporters reported sales of 700,634 metric tons in the week ended May 14, up 74 percent from the previous week, the Department of Agriculture said yesterday. Sales of soybean meal in the four-week period through May 14 doubled from a year earlier.

“Soybeans are targeting $12 a bushel,” said Toshimitsu Kawanabe, an analyst at Tokyo-based commodity broker Central Shoji Co. “The USDA data showed demand for the U.S. crop has increased sharply even during the seasonal peak of South American oilseed exports.”

Soybeans for July delivery added 0.2 percent to $11.7675 a bushel on the Chicago Board of Trade at 2:42 p.m. Singapore time. Futures have gained 20 percent this year.

China bought 27 percent of total U.S. soybean exports last week. The world’s biggest buyer has boosted purchases of U.S. soybeans to 18.5 million tons since Sept. 1, a 41 percent increase from a year earlier, the USDA said yesterday.

U.S. inventories on Aug. 31, before the harvest, will probably drop 37 percent to a five-year low of 130 million bushels, the USDA said on May 12.

Estimated global production this year will decline to 212.8 million tons because of smaller crops in drought-hit South America, the USDA said. The agency’s forecast a month ago was 218.8 million tons. Last year, output was a record 221.1 million tons.

Corn for July delivery advanced 0.4 percent to $4.2575 a bushel at 2:45 p.m. Singapore time. The price reached $4.3475 on May 20, the highest since Oct. 9, on speculation planting delays would reduce acreage and yields in the U.S. The grain has gained 2 percent this week and 4.6 percent this year.

July-delivery wheat added as much as 1.7 percent to $6.035 a bushel and last traded at $6.015. The contract has increased 4.2 percent this week, reaching a high of $6.0475 on May 20, the highest since Jan. 26. Still, futures have fallen 1.5 percent this year.

Farmers in Western Australia, the country’s biggest grain grower and exporter, will be able to begin planting after the state’s northern wheat region got “widespread” rain, CBH Group said.

There are reports of between 15 millimeters (0.6 inch) and 25 millimeters of rain in the northern wheat belt, Michael Musgrave, operations manager for the Perth-based grain handler and exporter, said today. The rain is “very pleasing” after a dry start to the growing season, he said.

Grain farmers in Australia, the world’s fourth-largest wheat exporter, need rain between April and June to sow crops including wheat, barley and canola.

OPEC to Maintain Oil Output After Price Recovery, Survey Shows

May 22 (Bloomberg) -- The Organization of Petroleum Exporting Countries is likely to keep output quotas unchanged for a second time this year as recovering oil prices forestall the need for new supply cuts, according to a Bloomberg survey.

Oil has climbed 86 percent from a four-year low at the end of last year, after OPEC announced record supply reductions to adjust to lower demand and rising stockpiles. The group will maintain a production target of 24.845 million barrels a day when it meets May 28, according to 25 of 27 analysts surveyed.

“Despite sky-high stocks, we expect another OPEC rollover,” said Mike Wittner, head of oil market research at Societe Generale SA in London. “Crude prices that have touched $60 and remain in the mid-to-upper $50s make it hard for OPEC to justify another cut.”

Oil traded in New York closed at $62.04 a barrel on May 20, a six-month high, before falling back yesterday.

Kuwait’s oil minister and OPEC’s former secretary general said this week that further output curbs are unlikely. Last month the oil minister for Saudi Arabia, the organization’s largest producer and de facto leader, said arranging prices at $50 a barrel was the country’s “contribution” to the world economy. Of the other members, only Iran has publicly advised new cuts at the coming meeting in Vienna.

“I don’t see any indications that OPEC is seriously considering cuts,” former Secretary-General Adnan Shihab-Eldin said in Dubai yesterday. “OPEC does not want prices to be at such a point that it jeopardizes the recovery.”

Call for Compliance

Venezuela, a member that often joins Iran in recommending lower output, said on May 15 the group should enforce quotas agreed on in December, without calling for new measures.

OPEC will opt for “steady as she goes, with a call for stricter compliance, and a communique acknowledging the economic recession and the possible need to cut output in the future,” said Peter Beutel, president of Cameron Hanover Inc., an energy consulting company in Connecticut.

OPEC’s ability to alter quotas may be limited by its failure to fully implement the series of cutbacks announced since last September. At its last gathering on March 15 the organization resolved to comply with agreed targets before considering fresh restrictions.

It has not been successful in doing this. The organization said on May 13 that last month it raised production for the first time since July, exceeding the collective quota by 967,000 barrels a day, or 3.9 percent.

Members Boost Output

The 11 OPEC members bound by targets implemented 77 percent of planned output cuts of 4.2 million barrels a day, down from a revised 82 percent for March, the Vienna-based organization said.

Still, OPEC may yet pay more attention to brimming stockpiles and concerns that demand is unstable rather than current prices, and choose to deepen output cuts, according to two of the survey respondents.

Crude inventories in the industrial economies of the Organization for Economic Cooperation and Development are at their highest since 1993, at 62 days of consumption, according to the International Energy Agency. Before OPEC’s meeting in December, members expressed concern that a level around 57 days was too high.

“OPEC will do the needful and cut by 1 million barrels a day for six months,” said Johannes Benigni, chief executive officer of JBC Energy GmbH in Vienna. “OPEC will be concerned about fundamentals, the build in inventories, rather than prices, as this is what their strategy has been.”

Oil Little Changed After Falling on U.S. Jobless Claims, Stocks

May 22 (Bloomberg) -- Crude oil was little changed near $61 a barrel in New York, after falling yesterday as jobless claims in the world’s largest oil-consuming nation topped economists’ forecasts and equities dropped for a third day.

The Standard & Poor’s 500 Index slipped 1.7 percent to 888.33 and the Dow Jones Industrial Average fell 1.5 percent to 8,292.13. Fuel demand in the past four weeks fell 7.6 percent from a year earlier, the U.S. Energy Department said May 20.

“For the last three or four months oil has been following the stock market,” Adam Sieminski, the chief energy economist at Deutsche Bank AG in Washington, said on Bloomberg Television.

Crude oil for July delivery rose 17 cents to $61.22 a barrel on the New York Mercantile Exchange at 9:40 a.m. in Sydney. Yesterday, the contract declined 99 cents, or 1.6 percent, to settle at $61.05 a barrel.

“There’s been a convergence between equities and the oil market,” said Brad Samples, a commodity analyst for Summit Energy Inc., an energy-management company in Louisville, Kentucky. “The trend continues and we are trading in sympathy with equities.”

Initial jobless claims fell by 12,000 to 631,000 in the week ended May 16 from a revised 643,000 the prior week that was higher than first estimated, the Labor Department said in Washington. Economists surveyed by Bloomberg had forecast jobless claims would drop to 625,000, according to the median of 42 estimates. The total number of workers receiving benefits rose to a record, a sign that the job market continues to weaken even as the economic slump eases.

OPEC Production

Crude stockpiles dropped by 2.11 million barrels last week to 368.5 million, the Energy Department said May 20. Gasoline supplies plunged 4.34 million barrels to 204 million.

Gasoline for June delivery rose 0.5 percent to $1.8078 a gallon in New York at 8:59 a.m. in Sydney. Yesterday, it declined 0.5 percent, to end the session at $1.7997.

The Organization of Petroleum Exporting Countries isn’t likely to reduce production quotas at its meeting in Vienna on May 28 because a further cut could hurt the ailing economy, the group’s former secretary-general said yesterday. OPEC agreed last year to three production cuts to bolster prices.

“I don’t see any indications that OPEC is seriously considering cuts,” Adnan Shihab-Eldin said yesterday at the Utilities Expansion conference in Dubai. “OPEC does not want prices to be at such a point that it jeopardizes the recovery.”

OPEC is likely to keep output quotas unchanged for a second time this year as recovering oil prices forestall the need for new supply cuts, according to a Bloomberg survey. The group will maintain a production target of 24.845 million barrels a day when it meets May 28, according to 25 of 27 analysts surveyed.

Brent crude for July settlement fell 66 cents, or 1.1 percent, to end the session at $59.93 a barrel on London’s ICE Futures Europe exchange.

Soybeans Rise as South America Crops Shrink, U.S. Exports Gain

May 21 (Bloomberg) -- Soybean prices rose for the fourth straight day after a government report showed lower oilseed production in South America, improving demand prospects for supplies from the U.S., the world’s biggest grower and exporter.

U.S. exporters reported sales of 700,634 metric tons in the week ended May 14, up 74 percent from the previous week, the Department of Agriculture said today in a report. In the four weeks ended on that date, sales of animal feed made from soybeans doubled from a year earlier. Yesterday, soybean futures climbed to the highest in seven months.

“Export sales continue to be very strong,” said Mike Zuzolo, the president of Risk Management Commodities Inc. in Lafayette, Indiana. “Demand is not slowing.”

Soybean futures for July delivery rose 6 cents, 0.5 percent, to $11.75 a bushel on the Chicago Board of Trade. Yesterday, the price reached $11.895, the highest since Sept. 26. The commodity has jumped 35 percent since the end of February, including 3.9 percent this week.

Shrinking crops in Brazil and Argentina, the two biggest exporters after the U.S., are boosting demand for U.S. soybeans and animal feed made from the oilseed, Zuzolo said. Argentina is the biggest exporter of animal feed and vegetable oil produced from the oilseed.

Estimated global production this year will fall to 212.8 million tons because of smaller crops in South America, the USDA said May 12. The agency forecast 218.8 million a month ago. Last year, output was a record 221.1 million.

The Buenos Aires Cereals Exchange yesterday cut its estimate for this year’s Argentina soybean harvest by 1.8 percent to 32.2 million tons after yields in parts of the Pampas were lower than expected. The USDA forecast a crop of 34 million on May 12. Last year, the harvest was 46.2 million.

Soybeans are the second-biggest U.S. crop, valued in 2008 at a record $27.4 billion, government figures show. Corn is the biggest at $47.4 billion.

Dollar Falls to 4-Month Low Versus Euro on U.S. Credit Outlook

May 22 (Bloomberg) -- The dollar fell to a four-month low against the euro and dropped versus the yen on speculation the U.S. government’s creditworthiness is weakening, sapping demand for the greenback.

The yen advanced to a nine-week high versus the dollar after Japanese Finance Minister Kaoru Yosano said the government isn’t planning to intervene in the foreign-exchange market. The dollar headed for its biggest weekly loss in two months versus the euro after Bill Gross, the co-chief investment officer of Pacific Investment Management Co., said the U.S. will “eventually” lose its AAA rating.

“We’re seeing a breakdown of the correlation of risk appetite and the dollar,” said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp., Australia’s biggest lender by market value. “A lot of Treasuries are held by foreign investors and any concern about the value of U.S. debt will have a massive impact on dollar sentiment.”

The dollar declined to $1.3926 per euro as of 9:25 a.m. in Tokyo, after reaching $1.3941, the lowest since Jan. 5. The U.S. currency has slumped 3.2 percent this week, the biggest drop since the five days to March 20.

The yen rose to 94.16 per dollar, after climbing to 93.87, the strongest since March 19. Japan’s currency traded at 131.08 per euro from 131.15.

The yen gained for a fourth day versus the greenback after Yosano said the “government isn’t considering currency intervention at this point.” Policy makers haven’t fully analyzed why the yen is gaining, he said at a press conference in Tokyo.

‘Dollar Weakness’

“We are seeing the appreciation of the yen, but mainly because of the negative views on the U.S. economy,” said Susumu Kato, chief economist in Tokyo at Calyon Securities, the investment banking unit of Credit Agricole SA. “It would be hard for the Japanese government to change the direction of the market because it’s more of a dollar-weakness issue rather than a yen-strength issue.”

The administration of President Barack Obama will sell a record $3.25 trillion of debt in the fiscal year ending Sept. 30, according to Goldman Sachs Group Inc. The U.S. Treasury reported the first budget deficit for April in 26 years, recording a $20.9 billion shortfall.

FKLI Commentary on 22/05/09

FKLI May futures contract fall 12 point lower to close at 1029 as compare to previous trading session with total 10,714 lots traded in the market. FKLI was traded lower due to weak performance for regional indices and Dow Jones electronic trading despite manage to test new high at 1045.5

Technically, FKLI starts to plunge soon after fails to breach resistance levels at 1043.5 regions. We expect FKLI will be traded lower in the coming trading session provided resistance levels at 1038 and 1043.5 must not be violated during the trading session. Traders were advice to hold short position around the resistance levels in the coming trading session while be alert around support levels at 1020 and 1000 regions.

FCPO Commentary on 22/05/09

FCPO 3rd month August Futures contract plunge RM103 lower to close at RM2499 as compare to previous trading session with 14,260 lots traded in the market. CPO price plunge throughout the entire trading session due to soybean oil and crude oil electronic trading despite were close firm during overnight trading.

Technically, CPO price continue to plunge as per our previous recommendation after fails to hold above previous support at RM2600 region. However, we expect CPO price might be temporary bottomed unless support levels at RM2466 and RM2440 were violated in the coming trading session. Traders were advice to take profit provided resistance levels at RM2555 and RM2602 were breach in the coming trading session.

Oil Snaps Three Days of Gains on Equity Drop, Refinery Restart

May 21 (Bloomberg) -- Crude oil fell in New York, snapping three days of gains, after the Federal Reserve predicted a deeper recession in the U.S. and a refinery resumed operations after a fire.

Oil declined after minutes of the Federal Open Market Committee meeting on April 28-29 showed that some members want the central bank to boost its purchases of assets to revive growth. Flint Hills Resources LLC planned to restart a gasoline- making unit at the Corpus Christi, Texas, refinery yesterday after shutting down the unit a day earlier because of a fire.

“We really haven’t seen any improvement in demand,” said Toby Hassall, a research analyst at Commodity Warrants Australia Pty in Sydney. “I just don’t think the fundamentals of the oil market can support prices up around the early $60s.”

Crude oil for July delivery dropped as much as 69 cents, or 1.1 percent, to $61.35, and was at $61.55 on the New York Mercantile Exchange at 1:50 p.m. in Singapore. Yesterday, oil rose $1.94, or 3.2 percent, to settle at $62.04 a barrel, the highest settlement since Nov. 10.

The Standard & Poor’s 500 Index slipped 0.5 percent to 903.47 and The Dow Jones Industrial Average lost 0.6 percent to 8,422.04.

Refinery Rates

Crude oil may be poised to fall further, based on technical indicators used by traders. The 30-day relative strength index has climbed to 60.58 today. The last time it was near this level, at 60.90 on July 14, the oil price started a 22 percent drop from $145.18 a barrel to $112.87 on Aug. 18.

U.S. refineries operated at 81.8 percent of capacity, down 1.9 percentage points from the prior week, the Energy Department report showed.

“It was a pretty significant drop,” Hassall said. “We are operating at the moment almost 10 percent below the five- year average rate, which is really an indication of the demand environment.”

Emissions associated with the Flint Hills refinery startup were planned between 3 p.m. and 9 p.m. local time yesterday, the company said in a “pre-notification” startup notice filed with the Texas Commission on Environmental Quality. A catalytic cracker makes products such as gasoline and diesel.

Sunoco Inc. shut a gasoline-making unit at its Marcus Hook, Pennsylvania, refinery after a fire on May 17.

Fighting between Nigerian troops and the militant group Movement for the Emancipation of the Niger Delta erupted on May 13. Nigeria produces low-sulfur oil, prized by U.S. refiners because of the proportion of high-value gasoline it yields.

Fizzling Rally

“So far the trend is up,” said Mike Sander, an investment adviser at Sander Capital Advisors Inc. in Seattle. “I would still be cautious for what is to come after Memorial Day and the OPEC meeting. The rally could fizzle and the markets could calm for the summer and stay flat to down.”

The Organization of Petroleum Exporting Countries is unlikely to reduce output further when it meets on May 28, a member of Kuwait’s Supreme Petroleum Council was cited as saying by state-owned KUNA news agency yesterday. OPEC is still implementing a series of supply cuts announced last year.

The 11 OPEC members with quotas, all except Iraq, pumped 25.812 million barrels a day last month, a report from the group on May 13 said, citing secondary sources, which include estimates from analysts and news organizations. That’s up 225,000 barrels a day from March.

Gasoline for June delivery declined as much as 3.75 cents, or 2.1 percent, to $1.7720 a gallon in New York.

Inventories Decline

Total U.S. daily fuel demand in the four weeks ended May 15 fell 7.6 percent from a year earlier, an Energy Department report showed yesterday.

Crude stockpiles dropped 2.11 million barrels to 368.5 million in the week ended May 15, the Energy Department said. A 400,000-barrel decrease was forecast, according to a Bloomberg News survey.

Gasoline supplies plunged 4.34 million barrels to 204 million. A 1.2 million-barrel drop was forecast, according to the median estimate of 15 analysts surveyed by Bloomberg News.

Energy and metals futures also gained after the dollar fell to the lowest level versus the euro in four months, bolstering demand for commodities as an alternative investment. The dollar traded at $1.3788 from $1.3780 yesterday, after dropping 1.1 percent and touching $1.3830, the weakest level since Jan. 5.

Gold rose to the highest in almost two months. Immediate- delivery gold gained for a third day, rising 0.4 percent to $942.24 an ounce at 11:29 a.m. in Singapore. Earlier, the metal touched $943.10, the highest since March 26, taking gains from year’s low of $802.59 to about 17.5 percent.

Brent crude for July settlement fell as much as 66 cents, or 1.1 percent, to $59.93 a barrel on London’s ICE Futures Europe exchange.

Soybeans Decline in Asia on Speculation Chinese Buying May Slow

May 21 (Bloomberg) -- Soybeans declined for the first time in four days on speculation buying by China, the world’s largest importer, may slow after prices climbed to the highest in nearly eight months.

Futures dropped as much as 0.5 percent in Asian trade after climbing to $11.895 a bushel yesterday, the highest since Sept. 26, on speculation output of the crop in South America and in Heilongjiang province, China’s biggest soybean producer, will decline, potentially boosting demand for U.S. supplies.

“Futures were capped by speculation that a rally in Chicago prices may spur Chinese to slow imports or cancel cargoes they booked previously,” Kazuhiko Saito, chief analyst at Tokyo-based commodity broker Fujitomi Co., said in a phone interview today.

Soybeans for July delivery lost 0.2 percent to $11.6625 a bushel on the Chicago Board of Trade at 1:03 p.m. in Tokyo.

Farmers in Heilongjiang may pare the area sown with soybeans by 6.4 percent from a year earlier to 3.72 million hectares, the China National Grain and Oils Information Center said yesterday.

The total area planted with the oilseed in China, the world’s largest importer, may decline 3.7 percent this year to 9.2 million hectares, the center said on May 8.

U.S. soybean inventories on Aug. 31, before the harvest, will drop to a five-year low of 130 million bushels, or 3.5 million tons, from 205 million a year earlier, the Department of Agriculture said on May 12. Global output this year may fall to 212.8 million tons from a record 221.1 million last year because of smaller crops in South America, the USDA said.

Corn for July delivery fell 0.2 percent to $4.25 a bushel at 12:49 p.m. in Tokyo. Prices were curbed by speculation that sunny weather in coming days may accelerate planting in the U.S. Midwest, Saito said. July-delivery wheat dropped 0.1 percent to $5.9725 a bushel.

India soyoil down as palm oil slips; firm spot supports

MUMBAI, May 20 (Reuters) - Indian soyoil futures fell on Wednesday tracking the advance of the south-west monsoon, which may hit the mainland between May 23-25, and on Malaysian palm, which ended down, but a firm spot limited osses, analysts said.

The fall in the near-month contract was sharper as traders liquidated positions ahead of expiry at close of trade on Wednesday.

At 3:44 p.m., the May contract NSOK9 was down 1.56 percent at 486 rupees per 10 kg on the National Commodity and Derivatives Exchange, while the June contract NSOM9 fell 0.43 percent to 499.85 rupees.

Prices in the spot market in Indore, a hub for trade in the commodity, rose 0.63 percent to 47,700 rupees per tonne.

India's annual monsoon rains may reach the southern state of Kerala between May 23 and 25, the weather department said on its website (www.imd.ernet.in) on Wednesday.

Last week, the department had predicted monsoon rains, crucial for crops such as cotton, soybean, sugarcane and rice, to hit Kerala on May 26, ahead of the normal date of June 1. [ID:nBMB005298]

August palm oil futures KPOc3 on Bursa Malaysia Derivatives Exchange ended down 1.06 percent at 2,602 ringgit a tonne. The contract was slightly positive early in the day. (Reporting by Abhishek Shanker; Editing by Sunil Nair)

Oil Trades Near $62 on Larger-Than-Forecast U.S. Supply Decline

May 21 (Bloomberg) -- Crude oil traded little changed near $62 a barrel after rising yesterday when a government report showed that U.S. crude and gasoline inventories declined more than forecast.

Stockpiles dropped 2.11 million barrels to 368.5 million in the week ended May 15, the Energy Department said. A 400,000- barrel decrease was forecast, according to a Bloomberg News survey. Prices also climbed after refinery fires and unrest in Nigeria threatened supplies and the falling dollar spurred investors to purchase raw materials.

“The crude and gasoline inventory drops are very supportive to the market,” said Rick Mueller, a director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “The problems in Nigeria and refinery disruptions are contributing to the rally.”

Crude oil for July delivery dropped 50 cents, or 0.8 percent, to $61.54 a barrel on the New York Mercantile Exchange at 8:49 a.m. in Sydney. Yesterday, oil rose $1.94, or 3.2 percent, to settle at $62.04 a barrel, the highest settlement since Nov. 10.

Gasoline supplies plunged 4.34 million barrels to 204 million. A 1.2 million-barrel drop was forecast, according to the median estimate of 15 analysts surveyed by Bloomberg News.

U.S. stocks retreated as the Federal Reserve predicted a deeper recession and concern grew that credit-card issuers will be hurt by new lending restrictions. The Standard & Poor’s 500 Index slipped 0.5 percent to 903.47 and The Dow Jones Industrial Average lost 0.6 percent to 8,422.04.

Rally Could Fizzle

“So far the trend is up,” said Mike Sander, an investment adviser at Sander Capital Advisors Inc. in Seattle. “I would still be cautious for what is to come after Memorial Day and the OPEC meeting. The rally could fizzle and the markets could calm for the summer and stay flat to down.”

The Organization of Petroleum Exporting Countries is unlikely to reduce output further when it meets on May 28, a member of Kuwait’s Supreme Petroleum Council was cited as saying by state-owned KUNA news agency yesterday. OPEC is still implementing a series of supply cuts announced last year.

The 11 OPEC members with quotas, all except Iraq, pumped 25.812 million barrels a day last month, a report from the group on May 13 said, citing secondary sources, which include estimates from analysts and news organizations. That’s up 225,000 barrels a day from March.

Gasoline for June delivery declined 1.95 cents to $1.7900 a gallon in New York at 8:51 a.m. Sydney time. Futures touched $1.8724 yesterday, the highest intraday price since Oct. 15.

Refinery Disruptions

Refineries operated at 81.8 percent of capacity, down 1.9 percentage points from the prior week, the Energy Department report showed.

Total U.S. daily fuel demand averaged 18.3 million barrels in the four weeks ended May 15, down 7.6 percent from a year earlier, the Energy Department report showed.

The industry-funded American Petroleum Institute reported on Tuesday a decline in crude-oil supplies of 4.47 million barrels for the period.

Disruptions at U.S. refineries included the shutdown of the catalytic cracker after a fire yesterday at Flint Hills Resources LLC’s Corpus Christi, Texas, plant. A catalytic cracker makes products such as gasoline and diesel. Sunoco Inc. shut a gasoline-making unit at its Marcus Hook, Pennsylvania, refinery after a fire on May 17.

Fighting between Nigerian troops and the militant group Movement for the Emancipation of the Niger Delta erupted on May 13. Nigeria produces low-sulfur oil, prized by U.S. refiners because of the proportion of high-value gasoline it yields.

Gold Rises

Energy and metals futures also gained after the dollar fell to the lowest level versus the euro in four months, bolstering demand for commodities as an alternative investment. The dollar traded at $1.3780 at 6:02 a.m. in Tokyo, after dropping 1.1 percent and touching $1.3830, the weakest level since Jan. 5.

Gold futures for June delivery rose $10.70, or 1.2 percent, to $937.40 an ounce on the Comex division of Nymex, the highest settlement since March 26. The Reuters/Jefferies CRB Index of 19 commodities increased 3.39 points, or 1.4 percent, to 244.84, the highest since Nov. 26.

Brent crude for July settlement rose $1.67, or 2.8 percent, to end the session at $60.59 a barrel yesterday on London’s ICE Futures Europe exchange, the highest since Nov. 5.

Soybeans Rise to Seven-Month High as China May Reduce Acreage

May 20 (Bloomberg) -- Soybean prices rose, extending a rally to a seven-month high, on speculation that China’s crop will shrink, boosting demand for dwindling U.S. supplies.

Farmers in Heilongjiang province, China’s biggest soybean producer, may reduce the area sown with the oilseed by 6.4 percent to plant more corn, Cao Zhi, an analyst at the state- backed China National Grain and Oils Information Center, said today. Reserve U.S. inventories will reach a five-year low before the next harvest, the government said last week.

“It is another bullish piece of news” in China, said Chad Henderson, an analyst at Prime Agricultural Consultants Inc. in Brookfield, Wisconsin. “The tight supply of soybeans will keep the market well-supported on hints of any new Chinese buying.”

Soybean futures for July delivery rose 7 cents, or 0.6 percent, to $11.69 a bushel on the Chicago Board of Trade, the third straight gain. Earlier, the price touched $11.895, the highest for a most-active contract since Sept. 26.

The total soybean area in China, the world’s largest importer of the oilseed, may fall 3.7 percent, the Grain and Oils Information Center said on May 8. The Asian nation will harvest 15.6 million metric tons this year, down 2.5 percent from last year, the U.S. Department of Agriculture said May 12.

Global soybean exports to China will rise 1.6 percent to 38.1 million tons in the marketing year that begins Oct. 1, up from a record 37.5 million this year, the USDA forecast.

High Demand

Demand for U.S. soybeans to move to export terminals near New Orleans and in the Pacific Northwest remains high because China is increasing imports to build reserves and boost production of animal feed and vegetable oil, Henderson said.

China may import more than 4 million tons in May, up from 3.71 million in April and 3.48 million tons a year earlier, the Grain and Oils Information Center said yesterday.

On May 18, Xinhua News reported that the government would buy an additional 1 million tons of soybeans from Heilongjiang province to add to state reserves. The country aims to stockpile 7.25 million tons, close to half of domestic output, by the end of June.

The market is “responding to the tight old-crop U.S. soybean supplies,” Anne Frick, a senior oilseeds analyst for Prudential Financial Inc. in New York, said today in a report to clients. July futures may rise to $12.18 a bushel “in an environment of still-large purchases by China,” Frick said.

Soybeans are the second-biggest U.S. crop, valued at $27.4 billion in 2008, behind corn at $47.4 billion, government figures show.

Dollar Falls to 8-Week Low Versus Yen as Fed May Buy More Debt

May 21 (Bloomberg) -- The dollar fell to an eight-week low against the yen on speculation the Federal Reserve will boost purchases of assets to counter the global slump, increasing the supply of the U.S. currency.

The yen gained versus all 16 most-traded currencies on concern the worst of the financial crisis is not over after the Fed predicted a deeper recession. The euro traded near a four- month high against the dollar before a European report that may show the contraction in manufacturing and service industries slowed, backing the case for the European Central Bank to leave interest rates unchanged.

“The Fed may expand its asset-purchase program, which would increase the supply of greenbacks in the market,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank. “This could undermine the value of the dollar and spur investors in the U.S. to put their funds overseas.”

The dollar slid to 94.46 yen as of 9:23 a.m. in Tokyo after touching 94.33 yen, the lowest since March 20, from 94.88 yesterday in New York. Japan’s currency advanced to 130.05 per euro from 130.77. Europe’s 16-nation currency traded at $1.3768 from $1.3780 yesterday, when it reached $1.3830, the strongest level since Jan. 5.

The Dollar Index, used by ICE to track the U.S. currency versus the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, dropped 0.1 percent to 81.120 after yesterday touching 80.91, the lowest level since Dec. 31.

Fed Purchases

Some Fed policy makers said “a further increase” in the total amount of asset purchases might be needed to speed a U.S. economic recovery, while all agreed to hold off on such a move, minutes of the April 28-29 meeting showed.

The dollar dropped a record 3.4 percent versus the euro on March 18, when the Fed announced plans to buy up to $300 billion in U.S. government debt to keep interest rates low and stimulate the economy, a measure known as quantitative easing.

The euro may gain for a fourth day versus the dollar before a European report that may show the region’s manufacturing and services contracted at the slowest pace in seven months.

A composite index of activity in both industries rose to 42 in May from 41.1 in April, according to the median estimate in a Bloomberg survey of economists.

Investors reduced bets European policy makers will cut their 1 percent benchmark at the June 4 meeting. The implied yield on the three-month Euribor futures contract for June delivery was 1.195 percent yesterday, from 1.105 percent at the beginning of the week.

Technical Support

Declines in the dollar against the yen may be limited as a chart some traders use to predict price movements signals today’s drop to the lowest level in eight weeks was overdone.

The dollar’s 14-day stochastic oscillator against the yen fell to 17 today, below the 20 level that signals the U.S. currency may have fallen too quickly and is poised to strengthen.

“There’s been a strong dollar-negative sentiment recently, but it’s reaching the lower band of the range,” said Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland Group Plc in Tokyo and a former Bank of Japan currency trader. “There are buyers around the 94.50 level, which may prevent the currency from weakening further.”

FCPO Commentary on 21/05/09

FCPO 3rd month August Futures contract fall RM28 higher to close at RM2602 as compare to previous trading session with 17,682 lots traded in the market. Choppy day for CPO trading session as prices were traded within large range while not much of main direction.

Technically, CPO seems continue to plunge after consolidate below RM2660; 61.8% Fibonacci retrace levels. We suggestion CPO would trade lower in the coming trading session where support seen at RM2555 and RM2488 regions. Traders were advice to hold short position in the coming trading session while be cautious around resistance levels at RM2660 and RM2700 regions.

FKLI Commentary on 21/05/09

FKLI May futures contract surge 12.5 point higher to close at 1041 as compare to previous trading session with total 9,247 lots traded in the market. FKLI continue to surge high during the trading session despite of weak regional indices and Dow Jones futures electronic trading performance.

Technically, FKLI breach previous high level and close at 1041 levels. FKLI seems might try to search for higher resistance levels around 1043 and 1060 regions. However, our opinion is FKLI might be slightly on the top side as extension has been holding for more than 2 months. Traders could hold long position for intraday trading but be aware of any reversal signal where supports were spotted around 1020 and 1000 regions.

CORRECTED - CORRECTED-Pakistan palm imports fall 20 pct in Apr-May -trader

ISLAMABAD, May 20 (Reuters) - Pakistan's imports of palm oil products fell up to 20 percent in April and May on good stocks and easing demand but will pick up next month and in the run-up to the Muslim fasting month, an industry official said on Wednesday.

Carryover stock from over-buying in the January-March quarter, low intake in rural areas during the wheat harvesting season, and cheap supplies of canola oil squeezed demand for palm oil, said Rasheed Janmohammad, vice-chairman of the Pakistan Edible Oil Refiners Association.

"Because of this, there was between a 15 and 20 percent reduction in the import of palm oil, palm olien and crude palm oil in April and May," Janmohammad told Reuters.

Pakistan, the world's fourth-largest importer of vegetable oil, imports a mix of refined and crude palm oil from Malaysia and Indonesia, the world's biggest producers.

It consumes about 3 million tonnes of edible oils a year, but produces only 500,000-800,000 tonnes of cottonseed, rapeseed and sunflower, relying on imports to meet about 80 percent of demand.

Pakistani traders went on a buying spree early this year after sharp price swings last year prompted them to delay purchases.

The country imported 166,140 tonnes of palm oil in February and 158,880 tonnes in January, according to official data. Official figures for March and April imports were not available.

Janmohammad said Pakistan had imported or ordered 780,000 tonnes of canola and sunflower oilseeds for the January to July period, at good prices and for the first time canola oil was cheaper in Pakistan than palm olien.

On Tuesday, canola oil was 88,500 rupees ($1,097) a tonne in the domestic market, compared with 91,700 rupees a tonne for palm olien, according to Janmohammad.

"So there is a huge arrival of canola oilseed and most of the ghee industry is buying canola oil ... There is less demand for palm olien," he said.

But imports of palm oil products are likely to pick up from next month.

"Pakistan remains completely uncovered from June onwards," Janmohammad said.

"We feel that as the month of Ramadan starts in the third week of August, Pakistan needs to buy reasonable tonnage for mid-June/mid-July," he said.

Demand tends to rise in the Islamic country of 160 million people during the Muslim fasting month, with people consuming more fried food when they break their fast after sunset. (Editing by Robert Birsel)

Palm Oil Extends Gains on Export Data From Malaysia, Indonesia

May 20 (Bloomberg) -- Palm oil futures in Malaysia advanced for a second day after data showed increased exports from Indonesia and Malaysia, the two largest producers of the commodity that’s used in foods and fuel.

Malaysian shipments rose 7.9 percent to 813,877 metric tons in the first 20 days of May compared with April, according to a report today from independent surveyor Intertek. Indonesia exported more in April on higher demand from India, the Indonesian Palm Oil Producers’ Association said yesterday.

“The export number is good,” said Wilianto Ie, a Jakarta- based analyst at CLSA Asia Pacific Markets. “It shows demand remains very firm” and the global financial crisis “hasn’t really deterred the demand,” Ie said by phone.

Palm oil for August delivery on the Malaysia Derivatives Exchange, the most-active contract, gained as much as 1 percent to 2,656 ringgit ($748) a ton, and was at 2,633 ringgit at the 12:30 p.m. trading break in Kuala Lumpur. The price has surged about 55 percent this year.

China and India, the biggest cooking oil users, “are still expected to have positive GDP growth,” Ie said. “It means the population is still getting richer compared to last year. It means that demand will still be there.”

Exports from Malaysia for the first four months of the year have advanced 9.8 percent to 5.06 million metric tons compared with the same period in 2008, according to data from the Malaysian Palm Oil Board.

Indonesia shipped 1.22 million metric tons of oil palm products last month compared with 1.18 million tons in March and 1.04 million tons in April last year, Susanto, marketing head of the nation’s producers’ association, said yesterday.

OilWorld Forecast

Palm oil also gained after OilWorld, an industry forecaster, cut its Malaysian production estimate to 17.8 million tons from 18 million tons for the year ending September, according to an AMResearch Bhd. report that cited Malaysia’s Business Times.

Rising demand and tighter-than-expected supplies of cooking oils worldwide will support palm oil prices, Dorab Mistry, director of Godrej International Ltd., said on May 18. Mistry forecast that palm oil may rise to more than 3,000 ringgit a ton.

September-delivery palm oil on the Dalian Commodity Exchange, the most-active contract, jumped as much as 1.6 percent to 6,810 yuan ($998) a ton, and was at 6,786 yuan at the 11:30 a.m. trading break.

Shares of palm oil-related companies in Indonesia, Malaysia and Singapore rose today. Wilmar International Ltd., the largest supplier of cooking oils in China, gained as much as 2.9 percent to S$4.68. The stock has gained 66 percent this year, beating the 29 percent advance in the benchmark Straits Times Index.

Golden Agri Resources Ltd., owner of the world’s second- largest oil palm plantation, gained as much as 13 percent to 47 Singapore cents, extending yesterday’s 12 percent jump.

Malaysia’s Sime Darby Bhd., the world’s largest palm oil grower, gained as much 4.5 percent in Kuala Lumpur, and PT Astra Agro Lestari, Indonesia’s biggest plantation stock, rose as much 1.9 percent.

Oil Trades Near $60 After Rising on Inventories, Refinery Fire

May 20 (Bloomberg) -- Oil traded little changed near $60 a barrel and gasoline extended gains after a U.S. industry report showed crude inventories declined and a fire at a Texas refinery curbed production.

The catalytic cracker caught fire at Flint Hills Resources LLC’s Corpus Christi plant, according to preliminary reports from the Texas environmental agency. U.S. crude inventories dropped 4.47 million barrels to 366.2 million barrels last week, the industry-funded American Petroleum Institute said yesterday. It was the third straight stockpile decline.

“The API numbers show a fairly sharp fall in U.S. crude inventories and gasoline inventories, so that would be supportive for oil today,” said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. “The oil price has risen ahead of the fundamentals, so I think it may fall back in time.”

Crude oil for July delivery fell 8 cents to $60.02 a barrel at 10:34 a.m. Sydney time on the New York Mercantile Exchange. Prices are up 35 percent this year. Yesterday, the June contract gained 1.1 percent to $59.65 in its final day before expiry.

The API collects inventory information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department.

The Flint Hills refinery has a capacity of 300,000 barrels of oil a day, according to data compiled by Bloomberg. A catalytic cracker is used to make higher-value products such as gasoline and diesel.

Lower Imports

Crude-oil stockpiles dropped 1.75 million barrels in the week ended May 15 from 370.6 million the previous week, according to the median of eight estimates by analysts before an Energy Department report today. The Energy Department is scheduled to release its weekly report on supplies at 10:30 a.m. in Washington.

Inventories may fall as oil imports to the U.S., the world’s biggest crude user, decline. Supplies brought into the country fell 12 percent to 8.71 million barrels a day in the week ended May 8, the lowest since the week ended Sept. 12, the Energy Department said on May 13.

Crude oil supplies climbed to 375.3 million barrels during the week ended May 1, the highest since September 1990, according to the department.

U.S. gasoline inventories dropped 5.4 million barrels to 206.2 million barrels, the API said.

Refinery Rates

Refineries probably operated at 84.1 percent of capacity last week, up 0.4 percentage point from the previous week, according to the median of responses in the survey. Refinery operations usually climb for the peak gasoline-consumption period, which lasts from the Memorial Day weekend in late May to Labor Day in September.

Sunoco Inc. shut a gasoline-making unit at its Marcus Hook, Pennsylvania, plant following a fire. Valero Energy Corp’s Delaware City, Delaware, plant released sulfur dioxide from its fluid catalytic cracking unit yesterday, according to a filing with Delaware state regulators.

Gasoline for June delivery gained 1.5 cents to $1.8275 a gallon in New York at 10:02 a.m. Sydney time. Yesterday it rose 3.1 percent to $1.8125, the highest settlement since Oct. 14.

Oil’s gains yesterday were aided by the dollar’s slump against major currencies, which bolstered demand for commodities as an alternative investment. The dollar traded at $1.3630 per euro at 6:14 a.m. in Tokyo, after falling 0.5 percent yesterday.

“The U.S. dollar was soft and gasoline prices were higher because of disruptions to a couple of refineries in the U.S.,” Moore said. “That had an upward pull on the oil price.”

Brent crude for July settlement fell 2 cents to $58.90 a barrel on London’s ICE Futures Europe exchange at 10:22 a.m. in Sydney. It rose 45 cents, or 0.8 percent, yesterday to $58.92, the highest settlement since Nov. 10.

Soybeans Rise to Seven-Month High, Corn Gains on Demand Outlook

May 19 (Bloomberg) -- Soybeans rose to a seven-month high and corn gained for the second straight day on speculation that the economy is recovering, boosting demand for the crops.

Crude oil rose to the highest in six months in New York and the MSCI World Index of equities climbed 1.5 percent as investors become more optimistic that the first global recession since World War II is ending. The dollar fell the most against a basket of six major currencies since May 8 as rising confidence in the U.S. banking industry sapped greenback demand.

“Crude strength, dollar softness, and strength in the equity markets carried soybean prices to new highs, while firming corn,” Dale Durchholz, a senior market analyst for AgriVisor LLC, said by e-mail. “As economic confidence grows, there’s movement of investment money back into commodities as a hedge against inflation.”

Soybean futures for July delivery rose 15.5 cents, or 1.4 percent, to $11.62 a bushel on the Chicago Board of Trade. Earlier, the price touched $11.695, the highest for a most- active contract since Sept. 26.

Corn futures for July delivery gained 4.25 cents, or 1 percent, to $4.2575 a bushel in Chicago, after advancing 1 percent yesterday. The most-active contract reached a seven- month high of $4.34 a bushel on May 13 and is up 4.6 percent this year.

Investments Increase

Improving economic confidence is increasing investment in commodities, said Charlie Sernatinger, a market analyst for Fortis Clearing Americas LLC in Chicago.

Hedge-fund managers and other large speculators increased their net-long positions in corn futures and options traded in Chicago by 70 percent to 137,273 contracts in the week ended May 12 from a week earlier, the highest in nine months, data from the Commodity Futures Trading Commission show.

Speculators increased net-long futures and options positions in Chicago soybeans by 6.6 percent to 112,138 contracts, the highest since July, according to CFTC data.

“Money continues to flow into commodities,” Sernatinger said.

Corn is the biggest U.S. crop, valued at $47.4 billion in 2008, followed by soybeans at a record $27.4 billion, government figures show.

Gold Prices Gain in New York as Dollar Weakens; Silver Climbs

May 19 (Bloomberg) -- Gold prices increased in New York as the dollar fell, boosting demand for the metal as an alternative investment. Silver also advanced.

The dollar weakened against the euro after Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley sought to repay $45 billion in government bailout cash, according to people familiar with the matter. The banks need approval for the payments from the Federal Reserve. Some investors buy gold as an alternative to the dollar. The greenback fell as much as 0.7 percent against the European currency.

“The market has attracted some support in response to a weaker dollar,” said Stephen Platt, an Archer Financial Services Inc. commodity analyst in Chicago.

Gold futures for June delivery rose $5, or 0.5 percent, to $926.70 an ounce on the New York Mercantile Exchange’s Comex division. The price has gained 4.8 percent this year.

Silver futures for July delivery climbed 29.5 cents, or 2.1 percent, to $14.125 an ounce in New York. The metal has surged 25 percent this year.

“It is growing concerns about the weaker dollar in future, given the increasing likelihood of an inflationary period to come, that is really driving gold higher,” said Patrick Chidley, an analyst at Barnard Jacobs Mellet USA LLC in Stamford, Connecticut.

“The time has arrived when more and more people are clamoring for inflation to make a real comeback,” Jon Nadler, a senior analyst at Kitco Inc. in Montreal, said today in a report.

Weaker Dollar

The U.S. Dollar Index, a basket of six major currencies including the euro and yen, has dropped 3.2 percent this month, enhancing the appeal of gold as an alternative investment. The index fell as much as 0.9 percent today.

“Gold -- of course I’m buying it,” said David Roche, the president of Independent Strategy, in a Bloomberg Television interview. He said the Standard & Poor’s 500 Index of equities may tumble as much as 30 percent in coming months.

“There remain plenty of hedge funds whose bets on the commodities sector are keeping a floor under metals and energies,” Nadler said in the report.

U.S. builders broke ground on the fewest homes on record in April. Housing starts unexpectedly slid 13 percent to an annual rate of 458,000, led by a 46 percent tumble in more volatile apartment buildings and condominiums, Commerce Department figures showed today in Washington. Building permits, a sign of future construction, fell 3.3 percent to a record pace of 494,000 units.

Yen Declines for Third Day Versus Euro After Japan GDP Report

May 20 (Bloomberg) -- The yen fell for a third day against the euro as stocks gained after a government report showed Japan’s economy shrank less than expected last quarter, spurring investors to buy higher-yielding assets.

The dollar strengthened against the yen as the yield differential between Japanese and U.S. debt expanded to the widest in more than a week. The pound strengthened yesterday to the highest level versus the dollar since December after interbank broker ICAP Plc posted increased profit and retailer Marks & Spencer Group Plc’s net income beat analysts’ estimates.

“The report suggests the economic downturn may be moderating,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “This may lead to stronger equities and selling of the yen.’

The yen fell to 131.17 per euro at 9:02 a.m. in Tokyo from 130.81 yesterday in New York. Japan’s currency declined to 96.18 per dollar from 95.97. Europe’s single-currency bought $1.3646 from $1.3630. The pound was little changed at $1.54881 after appreciating as much as 1.1 percent yesterday to $1.5523, the highest level since Dec. 18.

Japan’s economy shrank an annualized 15.2 percent in the three months ended March 31, following a 12.1 percent contraction the previous quarter, the Cabinet Office said today in Tokyo. Economists in a Bloomberg News survey expected a 16.1 percent contraction.

The dollar rose versus the yen as the difference in yields between 10-year Japanese and U.S. debt expanded to 1.82 percentage points, from 1.70 percentage points at the end of last week, according to data compiled by Bloomberg. The spread is likely to narrow to 1.65 percentage points by the end of June, according to a weighted Bloomberg survey of economists.

FCPO Commentary on 20/05/09

FCPO 3rd month August Futures contract surge RM60 higher to close at RM2630 as compare to previous trading session with 11,204 lots traded in the market. CPO price was traded higher due to strong soybean oil and crude oil strong trading.

Technically, CPO price seems rebound 61.8% Fibonacci retrace levels at RM2650 regions. We expect CPO price would trade lower in the coming trading session provided resistance levels at RM2650 and RM2684 must not be violated. Traders were advice to hold short position in the coming trading session while be cautious around support levels at RM2600 and RM520 regions.

FKLI Commentary on 20/05/09

FKLI May futures contract surge 25 point higher to close at 1028.5 as compare to previous trading session with total 7,519 lots traded in the market. FKLI rebound strong on losses ground after traded lower in the previous week while strengthen by regional indices and Dow Jones futures electronic trading.

Technically, FKLI seems challenge 78.6% Fibonacci retrace levels at 1028.5 regions which same levels with the trend line in the hourly chart. We still expect FKLI would trade lower in the coming trading session provided resistance levels around 1028 and 1038 must not be violated. Traders were advice to hold short position while be extra cautious around support levels at 1022 and 1012 regions.

Crude Oil Advances for Second Day on Gains in U.S. Equities

May 19 (Bloomberg) -- Crude oil rose for a second day as gains in the stock market increased optimism that the global economy is recovering.

U.S. stocks rallied, helping the Standard & Poor’s 500 Index recover more than half of last week’s loss, on better- than-forecast earnings by Lowe’s Cos. and after analysts recommended Bank of America Corp. The S&P500 Index rose 3 percent and the Dow Jones Industrial Average increased 2.9 percent.

“Sentiment has driven this market from its lows in the hopes of an imminent recovery,” said Toby Hassall, research analyst at Commodity Warrants Australia Pty in Sydney. “If we do see equities continue their rally, I think oil and a lot of other commodities are probably going to follow.”

Crude oil for June delivery rose 10 cents, or 0.2 percent, to $59.13 a barrel at 10:38 a.m. in Sydney on the New York Mercantile Exchange. Yesterday, the contract increased $2.69, or 4.8 percent, to settle at $59.03 a barrel, the highest settlement since Nov. 11. Futures are up 33 percent this year.

The June crude contract expires today. The more-actively traded July contract increased 8 cents to $59.67 a barrel at 10:38 a.m. in Sydney.

Gasoline for June delivery gained 7.75 cents, or 4.6 percent, to $1.7581 a gallon in New York, the highest settlement since Oct. 15.

Gasoline futures will average $1.40 a gallon during the summer, a 17 percent decline from May 15, according to surveys of five analysts by Bloomberg. Bets that gasoline will fall below $1.40 by May 26 have risen almost 10-fold in a month on the New York Mercantile Exchange.

U.S. Housing

“The housing market is going to be an area where the economy is going to need to see a recovery to really get a sense that the broader economy is going to turn around,” Hassall said.

U.S. housing starts increased in April to an annual rate of 520,000 from 510,000 in the previous month, according to the median forecast of 74 economists surveyed by Bloomberg. The Commerce Department is scheduled to release its report at 8:30 a.m. in Washington.

“We might be able to push above $60 if some of the macro data this week provides a bit more encouragement,” Hassall said.

The dollar may extend its decline against the euro on reduced demand for the greenback’s safety before the Commerce Department report is released. The dollar traded at $1.3561 versus the euro at 6:01 a.m. in Tokyo, after falling 0.5 percent yesterday. The yen was at 96.30 per dollar following a 1.1 percent drop after earlier touching 94.55, the strongest level since March 20.

Nigerian Fighting

The Movement for the Emancipation of the Niger Delta said that ships moving through the southern part of the country would be traveling at their own risk. Fighting in Nigeria has escalated since May 13 when militants said they responded to an army offensive by attacking military positions and hijacking a tanker.

MEND claimed responsibility May 17 for rupturing two pipelines supplying oil and natural gas from a Chevron Corp. facility to domestic refineries and power stations. The rebel group has threatened to blockade waterways in the southern region used for oil and gas exports.

Nigeria produces low-sulfur, or sweet, oil, prized by U.S. refiners because of the proportion of high-value gasoline and diesel it yields.

Angola, Africa’s second-biggest oil producer after Nigeria, will cut daily shipments by 6.8 percent in July. BP Plc, Total SA, Chevron Corp., Exxon Mobil Corp. and other companies are scheduled to load an average of 1.7 million barrels a day in July, compared with June’s 1.83 million, according to loading programs released through yesterday.

Demand Falls

U.S. crude-oil supplies fell 4.63 million barrels to 370.6 million in the week ended May 8, the first drop since February, the Energy Department reported last week. Stockpiles in the week ended May 1 were the highest since 1990.

Total U.S. daily fuel demand averaged 18.2 million barrels in the four weeks ended May 8, down 7.9 percent from a year earlier, according to the Energy Department. Gasoline demand averaged 9 million barrels in the same period, down 1.2 percent from a year earlier.

The Organization of Petroleum Exporting Countries should adhere closely to agreed production quotas to stabilize oil markets, OPEC President and Angolan Oil Minister Jose Maria Botelho de Vasconcelos, said in a statement yesterday. The group meets next on May 28 in Vienna.

Brent crude for July settlement rose $2.49, or 4.4 percent, to end the session at $58.47 a barrel on London’s ICE Futures Europe exchange. It was the highest settlement since Nov. 10.

U.S. Soy Supply Unlikely to Fall Further, Bunge Says (Update1)

May 18 (Bloomberg) -- U.S. soybean inventories, which the government says are heading to a five-year low, are unlikely to fall much further, according to Carl Hausmann, the chief executive officer of Bunge North America Inc.

Supplies on Aug. 31, before the next harvest, won’t be any lower than 100 million to 130 million bushels, Hausmann said today in an interview at the World Agricultural Forum in St. Louis. Bunge Ltd. is the world’s biggest oilseed processor.

“I don’t believe stocks can go below 100 million bushels,” Hausmann said. “If they look to be going lower, you will see an increase in price rather than a further decrease in carryout stocks.”

The soybean crop in the U.S., the world’s largest producer and exporter of the oilseed, will reach a record 3.195 billion bushels this year, up from 2.959 billion bushels in 2008, the Department of Agriculture said last week. Reserve inventories on Aug. 31 are projected at 130 million bushels. Rising production will boost stockpiles next year to 230 million bushels, the USDA said.

Falling Futures

Low supplies, and the higher costs for growing corn, which competes with soybeans for acreage, will prompt farmers to plant a record 76 million acres (30.8 million hectares) of the oilseed, the USDA said.

Increased production has helped drive futures down 30 percent from last year’s record. Still, Hausmann said a major weather disruption in the U.S., such as drought or flooding, combined with this year’s sparse South American rainfall, could push soybean prices back to 2008 levels.

“If we were to have a difficult growing season in North America this year, we could very easily be back to the high prices that we had last year,” said Hausmann, adding that he thought this was unlikely.

The World Agricultural Forum brings together executives from companies including Cargill Inc., the world’s largest agribusiness, Monsanto Co., Deere & Co. and others with agriculture ministers from developing world nations to discuss how to sustain global agricultural production.

Hausmann said Bunge needs to play a more vocal role in shaping agricultural development worldwide, balancing consumer needs with shareholder concerns.

“We need to engage in this societal debate to understand just what is our role,” he said. “We need to come up with a strategy that not only fits our shareholders interests in the short run, but must fit with society’s interests in the long run.”

White Plains, New York-based Bunge on April 23 fell 13 percent, the most in more than three months, after posting its second consecutive quarterly loss, partly because of lower demand for soybean meal. Still, the shares were up 7.4 percent this year before today as export demand for soybeans rose.

Gold, Silver Drop as Equity Rally Curbs Demand; Platinum Gains

May 18 (Bloomberg) -- Gold fell the most this month in New York, halting a four-day rally, as gains in global equity markets eroded the appeal of the precious metal as an alternative asset. Silver also declined, and platinum rose.

The Standard & Poor’s 500 Index added as much as 2.3 percent today, rebounding from a 5 percent decline last week. Some investors buy precious metals to preserve wealth and as a haven during financial turmoil. Gold jumped 1.8 percent last week as equities fell.

“Safe-haven flows seem to have ebbed out of the gold market,” said Jon Nadler, a senior analyst at Kitco Inc. in Montreal. “People see the gains in stocks and they think, ‘Let’s take a little bit of money off the gold table and put it into where the action is.’”

Gold futures for June delivery dropped $9.60, or 1 percent, to $921.70 an ounce on the Comex division of the New York Mercantile Exchange. The drop is the steepest since April 30.

The price rallied to $934.80 last week, the highest since April 1, as equity declines spurred concern that the economy may slow and boosted the precious metal’s appeal as a haven.

“Some of the funds that have been piling into gold in the last few weeks have pulled the profit trigger once again after the rally,” Nadler said. “There’s a tug-of-war going on now between: Do we see an economic recovery and do we still see safe-haven flows.”

Speculator Holdings

Hedge-fund managers and other large speculators increased their net-long position in New York gold futures by 6.8 percent in the week ended May 12, according to U.S. Commodity Futures Trading Commission data. Speculative long positions, or bets prices will rise, outnumbered short positions by 138,877 contracts on the Comex.

Silver futures for July delivery slipped 18 cents, or 1.3 percent, to $13.83 an ounce on the Comex.

Slowing jewelry demand in the past week may mean “gold above $920 an ounce is too pricey for many buyers,” John Reade, an analyst at UBS AG in London, wrote today in a report. Still, “this is the first time we have seen any noticeable jewelry demand above $900 an ounce, and in particular, the buying from India suggests that demand later in the year should increase a lot ahead of the Diwali festival.”

People in India, the world’s largest consumer of the precious metal, often give each other gifts of gold for holidays including Diwali, the Hindu festival of lights, which will be celebrated in October.

Platinum, Palladium

Platinum prices rose, rebounding from a 3.3 percent drop last week, as the improved economic outlook fueled speculation that demand will rebound for the metal, which is used in pollution-control devices in vehicles.

The global economy will start growing next year, John Lipsky, the International Monetary Fund’s first deputy managing director, said today. Confidence in the global economy has risen to the highest in 19 months, a worldwide survey of Bloomberg users showed last week.

Platinum futures for July delivery climbed $28.60, or 2.6 percent, to $1,137.60 an ounce on the New York Mercantile Exchange. That marks the biggest gain on a most-active contract since April 13.

Palladium futures for June delivery rose $3.05, or 1.3 percent, to $230 an ounce in New York. The price dropped 6.3 percent last week.

Yen May Fall as Optimism Recession Is Easing Spurs Yield Demand

May 19 (Bloomberg) -- The yen may weaken for a second day against the euro on speculation stock gains and signs the global recession is waning will encourage investors to buy higher- yielding assets.

Japan’s currency traded near its lowest in almost a week versus the Australian dollar before a U.S. government report that may show housing starts increased in April, boosting demand for riskier investments. The euro may gain for a second day against the dollar on speculation a German report today will show investor confidence jumped to a two-year high, signaling the worst of the slump may have passed.

“Equities are rising and the worldwide recession may have bottomed out,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank. “This augurs well for risk-taking appetite and is negative for the yen and the dollar.”

The yen traded at 130.56 per euro as of 8:51 a.m. in Tokyo from 130.61 in New York yesterday when it reached 126.98, the highest level since April 29. Japan’s currency was at 96.33 per dollar from 96.30 yesterday when it touched 94.55, the strongest since March 20. The euro bought $1.3550 from $1.3562.

Against the U.S. currency, the Australian dollar was at 76.44 cents from 76.58 cents and the New Zealand dollar traded at 59.58 cents from 59.51 cents. Australia’s dollar bought 73.61 yen from 73.75 yen in New York yesterday when it rose as high as 73.92 yen, the strongest since May 13.

‘Bounce Back’

“We are seeing a bounce back in risk appetite,” Brian Dolan, chief currency strategist at FOREX.com, a unit of the online currency trading firm Gain Capital Group in Bedminster, New Jersey, said in an interview on Bloomberg Television. “This has also seen the yen crosses, carry trades, move higher and the dollar move a little bit weaker.”

The Dollar Index, used by the ICE to track the U.S. currency versus the euro, yen, pound, Swiss franc, Canadian dollar and krona, traded at 82.559 from 82.529 yesterday, when it fell 0.6 percent. The gauge of the greenback decreased 7.9 percent since reaching a three-year high of 89.62 on March 4 as signs the global slump is easing led investors to sell Treasuries.

U.S. housing starts increased in April to an annual rate of 520,000 from 510,000 the previous month, according to the median forecast of economists surveyed by Bloomberg. The Commerce Department will release the report at 8:30 a.m. in Washington.

Carry Trades

The yen slid 3.2 percent to 46.52 versus the Brazilian real and 3.3 percent to 11.30 versus South Africa’s rand yesterday on speculation investors increased carry trades, in which they get funds in a country with low borrowing costs and buy assets where they expect returns to be higher.

Japan’s target lending rate is 0.1 percent, compared with 10.25 percent in Brazil, 8.5 percent in South Africa, 3 percent in Australia and 2.5 percent in New Zealand.

Japan’s currency started its decline yesterday after Vice Finance Minister Kazuyuki Sugimoto said “excessive moves” in currencies may hurt the economy.

The yen gained 8.5 percent versus the dollar since the collapse of Lehman Brothers Holdings Inc. on Sept. 15 as investors sought refuge from global financial turmoil.

“Excessive moves in currencies are undesirable as they would have a negative effect on the Japanese economy,” Sugimoto said. “We’ll continue to monitor currency markets.”

Waning global sales and a stronger currency hurt Japan’s exporters this year. Toyota Motor Corp. expects global sales to fall by 1.067 million vehicles to 6.5 million in the year ending March 31 and is predicting another annual loss.

The euro rose yesterday from its lowest level in more than a week versus the dollar on speculation a German report today will show investor confidence increased.

The ZEW Center for European Economic Research will say its index of investor and analyst expectations rose to 20 from 13 in April, according to the median forecast in a separate Bloomberg survey. ZEW releases the report, which aims to predict economic developments six months ahead, at 11 a.m. in Mannheim.

FKLI Commentary on 19/05/09

FKLI May futures contract fall 6.5 point lower to close at 1003.5 as compare to previous trading session with total 7,932 lots traded in the market. FKLI rebound in the 2nd trading session due to strong regional indices performance during the trading hours.

Technically, FKLI seems stopped below the downtrend channel resistance trend line at 1007 regions; 38.1% Fibonacci retrace levels. We expect FKLI would trade lower in the coming trading session provided resistance levels at 1007 and 1015 were not violated in the coming trading session. Traders were advice to hold short position in the coming trading session while be cautious around support levels 996 and 980 regions.

FCPO Commentary on 19/05/09

FCPO 3rd month August Futures contract fall RM42 lower to close at RM2570 as compare to previous trading session with 13,778 lots traded in the market. CPO price rebound during trading session as soybean oil and crude oil electronic were traded firm despite plunge on the previous trading session.

Technically, CPO price seems resisted by 80 – day and 100 – day exponential moving average in the 5 minutes charts at RM2605 region; 38.1% Fibonacci rebound levels. We expect CPO price would trade lower in the coming trading session provided resistance levels at RM2605 and RM2635 regions were not violated. Traders were advice to hold short position in the coming trading session while be cautious around support levels at RM2520 and RM2460 regions.

Palm prices to surge as Asia chases cargoes -Mistry

KUALA LUMPUR, May 18 (Reuters) - Malaysian palm oil futures could soon surpass a key psychological level of 3,000 ringgit as Asian buyers hunger for more of the vegetable oil at a time of low stocks and weak output, a top industry analyst said on Monday.

Dorab Mistry, head of vegetable oil purchasing at Indian conglomerate Godrej International, said orders from the world's top two buyers of vegetable oils -- China and India -- were set to jump as the world economy recovers.

Palm oil supplies are dwindling in top producers Indonesia and Malaysia due to weak output arising from lack of fertiliser use when prices fell dramatically last year, coupled with volatile weather and yield stress after months of good harvests.

In addition, the top two soy exporters, the United States and Brazil are experiencing low stocks after a supply shortfall in third largest soy producer Argentina, which may result in a powerful bull market emerging for vegetable oils, said Mistry, who is based in London.

"The situation in soya is more bullish than in palm and soft oils will soon take price leadership," he said in a speech to be delivered at a regional palm oil conference in Tokyo.

"However, price-conscious markets like India will chase palm and therefore I expect Bursa Malaysia crude palm oil futures to exceed 3,000 ringgit (per tonne) very quickly," he said.

Traders consider this figure a key resistance level after prices exceeded it last year before falling back to just over 1,000 ringgit, from which they have since struggled to recover.

Benchmark Malaysian prices on Friday were just 12.7 percent below 3,000 ringgit level KPOc3. Malaysian refined palm olein FOB traded at $830 per tonne for June compared to European soyoil at $886 in Rotterdam last week, Reuters data showed.

China will buy more vegetable oil in the second half than the first as its 4 trillion yuan stimulus package has revived some consumption and current total shipments are 24 percent behind imports of 8.1 million tonnes last year, Mistry said.

But India will now drive palm and soyoil demand rather than China after the government scrapped import taxes for edible oils, starting with palm oil, last year. Mistry said purchases would hit 8.5 million tonnes for the oil year ending Oct. 2009.

"India's low per capita consumption was artificially suppressed by high import duties and now that the heavy burden has been lifted, it has come into its own," Mistry said, pegging demand at 1.4 kilos per person. India has 1.1 billion people.

For a related factbox on Mistry's new and previous forecasts on Indian vegetable oil import demand, click on [ID:nKLR81840]

SUPPLY SHORTFALL

Surging Asian demand will chase low palm stocks in Malaysia, which are expected to stay below 1.4 million tonnes until mid-August as output will recover that month when the low yield cycle draws to an end and more fertiliser is used, Mistry said.

"Replenishment of stocks will be very gradual and will commence only in mid-July. I expect Malaysian palm oil stocks to peak in November at 1.7 to 1.8 million tonnes at best," he said.

For a related factbox on Mistry's revised full-year palm output forecasts for Malaysia and Indonesia, click [ID:KLR479598]

The recovery in palm oil output may ease the shortfall in rival vegetable oils, especially soyoil in South America, with leading soy exporter Brazil possibly hiking its biodiesel mandate to 4 percent from 3 percent in July this year.

"It will rule out any further exports of soy oil from Brazil in the second half of 2009," Mistry said. "Brazil has exported beans and products very aggressively in order to make up for the slow pace of disposals in Argentina."

Mistry said soyoil shipments from No. 3 soy exporter Argentina, already suffering from drought and a tussle between farmers and the government over soy export taxes, would be much smaller after Oct. on a smaller crop and electricty cuts.

"Between June and August there are likely to be electricity cuts due to the shallow water levels as a result of the drought. That factor will affect export of meal and oil," he said, but did not issue forecasts of Argentine and Brazilian soyoil exports. (Editing by Clarence Fernandez)

FKLI Commentary on 18/05/09

FKLI May futures contract rebound 7 point higher to close at 1010 as compare to previous trading session with total 6,839 lots traded in the market. FKLI market was traded sideways throughout entire trading session despite regional indices and Dow Jones electronic trading rebound sharply during trading session.

Technically, FKLI seems traded sideways during trading session but manage to hold below 80 – day and 100 – day exponential moving average in the hourly chart. We expect FKLI would trade lower in the coming trading session provided resistance levels at 1015 and 1028 were not violated in the coming trading session. Traders were advice to hold short position in the coming trading session while be cautious around support levels at 993 and 982 regions.

FCPO Commentary on 18/05/09

FCPO 3rd month July Futures contract fall RM21 lower to close at RM2663 as compare to previous trading session with 8,551 lots traded in the market. CPO price continue to plunge despite was opened strong due to soybean oil and crude oil firm overnight closing.

Technically, CPO price continue to plunge after manage to rebound 61.8% Fibonacci retrace levels at RM2755 regions in the 15 min chart. We expect CPO price would trade lower in the coming trading session towards support levels seen at RM2600 and RM2553 regions. Traders were advice to hold short position in the coming trading session while be alert around resistance levels at RM2710 and RM2684 regions.