Palm oil inches up on anticipation of lower output, short covering
Malaysian palm oil futures rose on expectations of weaker December production due to heavy rains in Sarawak and short-covering ahead of holidays. Gains were limited by softer demand, a stronger ringgit and record South American soybean output. Palm oil also tracked mild increases in global soyoil markets despite weaker crude oil prices.
KUALA LUMPUR: Malaysian palm oil futures climbed on Tuesday, as expectations of weaker production and short-covering activity supported the market.
The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange gained 25 ringgit, or 0.62%, to 4,072 ringgit ($1,005.18) a metric ton by the midday break.
On Monday, it snapped a four-session winning run.
The market recovered on signs that the December output could be lower as more widespread rains are expected to fall in East Malaysia, specifically in the state of Sarawak, said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.
The Malaysian Meteorological Department on Monday said that a monsoon surge from January 1 to 5 has the potential to bring heavy rain in Sarawak, as well as strong winds and rough seas in the South China Sea.
“We are also seeing short-covering activities today ahead of the holidays,” Supramaniam said. However, Supramaniam said the tapering demand, strength in the ringgit and record soybean crop in South America will cap gains.
Dalian’s most-active soyoil contract rose 0.33%, while its palm oil contract added 0.84%. Soyoil prices on the Chicago Board of Trade were up 0.24%.
Palm oil tracks price movements of rival edible oils, as it competes for a share of the global vegetable oils market. Oil prices retreated after rising more than 2% in the previous session, partly driven by spillover from a pullback in precious metals, even as escalating Russia–Ukraine tensions left markets grappling with supply disruption fears.
Weaker crude oil futures make palm a less attractive option for biodiesel feedstock.
The ringgit, palm’s currency of trade, strengthened 0.17% against the dollar, making the commodity slightly more expensive for buyers holding foreign currencies.
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Source : Business Recorder
