Malaysian palm oil futures gained on Friday, reversing earlier losses as prospects of lower production and expectations of rising demand overshadowed lingering concerns about the health of the global economy. Industry sources expect lower production in November due to La Nina-driven rains and a seasonal decline in yields, while demand for palm oil is seen picking up soon as China will replenish its stocks ahead of the Chinese New Year festival in January.
"It's a tug of war today between local weather play and technical weakness. Next week's focus will shift to the November production numbers," said a Kuala Lumpur-based dealer. Benchmark February palm oil futures on the Bursa Malaysia Derivatives Exchange inched up 0.1 percent to close at 3,062 Malaysian ringgit ($980) per tonne.
Overall traded volumes stood at 19,048 lots of 25 tonnes each, thinner than the usual 25,000 lots as the industry attends the Indonesia Palm Oil Conference and Price Outlook 2012. Leading industry ministry Dorab Mistry said at the conference that weaker growth in Southeast Asian palm oil production and normal demand expansion will set the stage for a bull market next year. He stuck to his earlier price forecast for palm oil to hit 3,300 ringgit in January. A price poll carried out at the conference also showed average palm oil prices to fall to 3,115 ringgit a tonne next year, on expectations of output recovery and a bleak global economic outlook.
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