Palm rises on fears of lower production, demand concerns

Malaysian palm oil futures ticked up for a second straight session on Thursday, supported by expectations of a decline in production, though a lack of demand from key importing countries limited the gains.

The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange gained 31 ringgit, or 0.72 per cent, to 4,365 ringgit (US$986.44) a metric ton at the midday break.

Production concerns persist, with Malaysian output expected to decline by about 13 per cent -15 per cent in February due to rains and floods across the country, said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.

The lack of demand from key markets is also a concern, Paramalingam added.

“For prices to sustain at these levels, there needs to be stronger buying interest, which is currently not seen. There’s not much of a festive season left. I think prices will be rangebound until the next MPOB figures are out.”

The Malaysian Palm Oil Board (MPOB) is expected to release its monthly supply and demand data on February 10.

Dalian’s most-active soyoil contract rose 1.58 per cent and its palm oil contract added 1.31 per cent. Soyoil prices on the Chicago Board of Trade gained 0.49 per cent.

Palm oil tracks the price movements of rival edible oils as it competes for a share of the global vegetable oils market.

Oil prices rose in early Asian trading, steadying from a sell-off the previous day after Saudi Arabia’s state oil company sharply raised March oil prices.

The ringgit, palm’s currency of trade, weakened 0.16 per cent against the US dollar, making the commodity cheaper for buyers holding foreign currencies.

Malaysia’s palm oil inventories likely dropped to their lowest in nearly two years in January, as adverse weather disrupted production, although lower exports offset some of the decline, a Reuters survey showed.

Tags: futures, benchmark contract, soyoil, Malaysia, palm oil