KUALA LUMPUR: Malaysian palm oil futures registered the sharpest daily gains in a week, lifted 1.3 percent on Wednesday evening by strong local and overseas demand.
The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange reached 2,643 ringgit ($611.66) a tonne by the close.
Traded volumes stood at 52,291 lots of 25 tonnes each at the end of the trading day.
"The market is up due to stronger physical demand," one Kuala Lumpur trader said, attributing the rise in demand to the forthcoming fasting month of Ramadan, during which Muslims break day-long fasts with communal feasting that increases palm oil use for cooking.
Malaysian shipments of palm oil products rose 7-8.9 percent in the first half of May compared with the same period last month, cargo surveyor data showed.
Another trader said that local demand added to the stronger take-up of palm oil but that the market overall lacked strong direction.
Rising production is expected to weigh on palm oil prices, which have already fallen from five-year highs at the start of the year.
Palm oil output in Malaysia, the world's No.2 producer of the tropical oil, is expected to rise until the third quarter of the year in line with the seasonal trend and as the crop-damaging effects of El Nino wear off.
The palm oil August contract looks neutral in a narrow range of 2,578-2,614 ringgit a tonne, and an escape could suggest a direction, said Wang Tao, a Reuters market analyst for commodities and energy technicals.
In related vegetable oils, soybean oil on the Chicago Board of Trade was up 0.9 percent, while the September soybean oil contract on the Dalian Commodity Exchange rose 0.3 percent.
The September contract for palm olein was up 0.8 percent.
Palm prices are affected by the movements of rival oilseed soy, which competes for a share in the global vegetable oils market.
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