KUALA LUMPUR: Malaysian palm oil futures rose over 2% to a two-month high close on Wednesday, on lower-than-expected May production forecast and higher crude prices.
The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange rose 59 ringgit, or 2.52%, to 2,400 ringgit ($563.51) a tonne, its highest closing level since April 1.
May output in Malaysia, the world's second largest palm oil producer, possibly rose between 0% and 4%, traders said after days of uncertainty.
The forecast is smaller than a previous Malaysian Palm Oil Association estimate of an 11.8% monthly rise during the first three weeks of May.
"Exports are better in June, with offtake mainly coming from India, but July demand is just lukewarm," Paramalingam Supramaniam, director of Selangor-based brokerage Pelindung Bestari Sdn Bhd.
European Union palm oil imports in the 2019/20 season were down 11% at 5.25 million tonnes from the previous year.
Oil climbed above $40 a barrel for the first time since March on Wednesday, supported by signs of recovery in coronavirus-hit demand, lower US inventories and expectations that OPEC+ will keep oil output cuts in place.
Stronger crude oil futures make palm a more attractive option for biodiesel feedstock.
Dalian's most-active soyaoil contract rose 0.67%, while its palm oil contract jumped 1.88%. Soyaoil prices on the Chicago Board of Trade were also trading 0.57% higher.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
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