Palm oil climbs over 1% as India cuts import taxes

KUALA LUMPUR: Malaysian palm oil futures extended early gains on Monday, as lower import taxes in India, the world's biggest vegetable oil buyer, raised demand hopes amid traders concerns of tight edible oil supply worldwide for the rest of the year.

The benchmark palm oil contract for November delivery on the Bursa Malaysia Derivatives Exchange was up 72 ringgit, or 1.68%, at 4,350 ringgit ($1,049.96) a tonne during early trade.

Top buyer India cut its base import taxes on palm oil, soyoil and sunflower oil on Friday.

The processing margins for crude sunflower oil is now the most competitive, thus, palm oil may not benefit much from the duty change as buyers may be more encouraged to import sunflower oil instead, UOB KayHian said in a note.

Weighing on sentiment, Malaysia's end-August palm oil inventories beat market expectations with a 25% surge as production rose and exports plunged, according to Malaysian Palm Oil Board data on Friday.

CGS-CIMB Research projected end-September stockpile to rise 1% from August to 1.89 million tonnes as total supply outstrips demand.

"We expect Sept. palm oil output to fall 4% month-on-month driven by fewer working days, and exports to grow 25% as consumers replenish inventories," regional head of plantations research Ivy Ng said in a note.

Palm falls on August export plunge, profit-taking

Ng projected prices to remain firm at 3,500 ringgit-4,500 ringgit a tonne this month, amid tight global edible oil inventories and expectations for Malaysia's palm oil supply to remain below potential for the rest of the year due to a labour crunch.

The global supply squeeze could worsen if adverse weather conditions are prolonged with another La Nina weather pattern that may happen from December to February, UOB KayHian said.

Soyoil prices on the Chicago Board of Trade were down 0.4%. Dalian's most-active soyoil contract and its palm oil contract both slipped 0.5%.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.