Malaysian palm oil futures surged over 2% on the first trading session of 2020, surpassing rival soyabean oil on the Chicago Board of Trade on higher imports from India due to a tax cut amid expectations of lower December inventories.
The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange closed up at 74 ringgit, or 2.4%, at 3,126 ringgit ($765.24), reversing a 2.4% drop in the previous session on year-end profit-taking.
It had peaked to a new near three-year high of 3,144 ringgit earlier in the session, the highest since Jan. 25, 2017.
The Chicago Board of Trade was closed for the New Year holiday, but last traded at 3,109 ringgit on Tuesday.
"As production has not recovered much, buying momentum is still there. Buyers are betting on lower end-stock for December," said a Kuala Lumpur-based trader.
India on Tuesday slashed its import taxes on crude and refined palm oil from Southeast Asian countries, a move that is expected to lead to higher imports by the world's largest edible oil buyer.
The duty on crude palm oil was lowered to 37.5% from 40%, while a tax on the refined variety saw a larger cut to 45% from 50%.
The narrower duty differential between crude palm oil and refined palm oil would see higher demand of the latter, which could dampen crude palm oil's rally for the near term, the trader said.
Palm oil prices soared nearly 44% in the final quarter of 2019 on declining stockpiles and expectations of a production drop in the first half of 2020 due to dry weather and lower fertiliser usage in top producers Malaysia and Indonesia in 2019.
Traders said Malaysia's exports fell at a slower pace than market expectations last month.
December exports declined between 4.9% and 6.7% from the month before, cargo surveyors Intertek Testing Services, Societe Generale de Surveillance and Amspec Malaysia said on Tuesday.
The Dalian Commodity Exchange's most-active soyaoil contract fell 0.2%, while the palm oil contract slid 0.5%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
Palm oil may temporarily peak in a strong resistance range of 3,163-3,221 ringgit per tonne in the first quarter as suggested by a Fibonacci ratio analysis, Reuters technical analyst Wang Tao said.
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