KUALA LUMPUR: Malaysian palm oil futures surged nearly 3 percent to two-month highs on Tuesday evening, supported by expectations of lower than forecast production in July and tracking strong gains in soyoil on the Chicago Board of Trade (CBOT).
The benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange was up 2.9 percent at 2,626 ringgit ($613.55) a tonne at the close. That was the highest since May 23 thanks to the best daily gain in more than three months.
Traded volumes stood at 53,471 lots of 25 tonnes each in the evening.
"The palm market was up, riding the CBOT rally on reports of crop damage," one Kuala Lumpur-based futures trader said.
The October soybean oil contract on CBOT rose by 0.9 percent, in line with soybean prices that hit two-week highs after the US Department of Agriculture said that recent dry weather had damaged more of the crop than expected.
Palm oil prices track movements in related edible oils that compete for a share in the global vegetable oils market.
The trader said the market had lowered its forecast for palm oil production in July, supporting prices in early Tuesday trade.
Palm oil production in Malaysia, the second-largest producer behind Indonesia, is seen rising in the second half of the year, but gains could be limited by the lingering impact of the crop-damaging El Nino in 2015.
Production in 2017 is estimated to reach between 18.7 million tonnes and 19.5 million tonnes, up by about 10 percent from 2016 levels but below the record high of 19.96 million tonnes in 2015.
Palm oil seems to have stabilised around support at 2,541 ringgit a tonne and could rise towards resistance at 2,591 ringgit, said Wang Tao, a Reuters market analyst for commodities and energy technicals.
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