SINGAPORE: Malaysian palm oil futures gained 1.5 percent on Wednesday with the market climbing for a second session to its highest since Sept. 27, supported by rising crude oil prices.
Strength in rival soybean oil provided additional support to the tropical oil but gains were capped by higher palm oil reserves in Malaysia, the world's second largest producer.
The benchmark palm oil contract for December delivery on the Bursa Malaysia Derivatives Exchange was up 33 ringgit, or 1.5 percent at 2,193 ringgit ($530.09) a tonne, after rising to its highest since Sept. 27 at 2,199 ringgit a tonne earlier in the session.
Trading volumes stood at 17,162 lots of 25 tonnes each by the end of the morning session.
"Gains in crude oil prices are supporting palm oil because the higher crude oil goes there will be more use of palm oil in making biodiesel," said a Kuala Lumpur-based trader. "Had it not been for the strength in crude oil, palm oil would have dropped below 2,000 ringgit a tonne because the stocks are high."
Oil prices were firm on expectations of a tighter market once US sanctions start targeting Iran's petroleum industry from next month, although a strong dollar and rising US crude supply curbed gains.
Soybean oil climbed to its highest since late June as unseasonal rains slowed the soybean harvest in parts of the US Midwest.
Palm oil stockpiles are expected to keep a lid on the market.
Malaysian palm oil inventories rose to a seven-month high of 2.49 million tonnes in August, official data from a Malaysian industry regulator showed.
Industry analyst Dorab Mistry also pegged Malaysia's peak end-stocks at 3-3.3 million tonnes for the year, while estimating that Indonesia's inventories are currently close to 5 million tonnes and will keep rising.
The Dalian January soybean oil contract and January palm oil contract were untraded as the Dalian Commodity Exchange was closed for national holidays in China.
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