KUALA LUMPUR: Malaysian palm oil futures settled higher on Friday and posted a weekly gain ahead of the Lunar New Year festive period, buoyed by expectations of declining production in the world’s second-biggest producer.
The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange closed 7 ringgit, or 0.18%, higher at 3,881 ringgit ($815.34).
The contract gained 3.12% for the week.
Malaysian palm oil futures showed strong buying momentum mirroring gains in related soybean oil on the Chicago Board of Trade’s overnight close, which received support from volatile soybeans, said Sathia Varqa, senior analyst at Singapore-based Fastmarkets Palm Oil Analytics.
“Higher palm futures were also reinforced by the expectation of a bullish Malaysian Palm Oil Board report, due next week on Feb. 13,” Varqa added.
The report is expected to show a drop in production to the lowest volume in nine months, which will help trim the current bloated stocks, Varqa added.
Malaysia’s palm oil stocks likely fell for three consecutive months to end-January, in line with low seasonal production.
Palm oil stocks were seen falling to 2.14 million metric tons in January, down 6.62% from December, according to 10 traders, planters and analysts.
Crude palm oil output was seen declining 11.83% from the previous month to 1.37 million tons.
Palm oil rebounds to close higher ahead of output data
Soyoil prices on the Chicago Board of Trade were down 0.77%.
Dalian’s vegetable oil markets were closed for a public holiday.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
Oil prices were little changed on Friday, staying on track for weekly gains, with tensions persisting in the Middle East after Israel rejected a ceasefire offer from Hamas.
Stronger crude oil futures make palm a more attractive option for biodiesel feedstock.
The ringgit, palm’s currency of trade, rose 0.13% against the dollar, making the commodity more expensive for buyers holding the foreign currency.
The rebound in palm oil prices is likely to be capped by abundant supplies of rival soyoil and sunflower oil, “soft” oils that are available at discounts to tropical palm oil for the first time in more than a year.
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