Malaysian palm oil at one-week high

Malaysian palm oil futures hit one-week highs on Monday as floods in key growing areas delayed deliveries, raising concern of a further tightening in global vegetable oil supplies and escalating inflation in importing nations. Palm oil notched its highest daily gain this year with traders expecting the market to rally as floods in key producing regions of Johor and Sabah cut off access roads and bring harvesting to a standstill.
The benchmark April crude palm oil contract on the Bursa Malaysia Derivatives rose as much as 3 percent to 3,809 Malaysian ringgit ($1,247)a tonne, a level unseen since January 24. Traded volume stood at 19,085 lots at 25 tonnes each, as traders were compelled to take positions ahead of the a string of public holidays, including Federal Territories day on Tuesday and Lunar New Holiday on Thursday and Friday.
Prolonged exposure to moisture has also affected yield quality for palm fruit, raising fears of a squeeze in palm oil supplies at a time when food demand is still resilient. "The potential food crisis has become a little more real with Malaysian palm oil in trouble," said a trader with a local commodities brokerage.
"This news is going to prompt more short-covering as the main vegetable oil markets are going to be closed this week for the Lunar New Year." A Reuters technical analysis showed palm oil will rise to 3,820 ringgit per tonne as it could resume its long-term bull trend as indicated by its wave pattern and a possible double-bottom pattern.
While some refiners said their factories would slow down for the holidays, the prospect of a supply squeeze will make it difficult to meet orders as overseas demand is still resilient. Cargo surveyor Intertek Testing Services reported a 3.6 percent decline in January exports from a month ago but traders said the exports staying above 1.2 million tonnes showed demand was still strong from European Union.
Higher palm oil prices added to gains in US soyoil , which rose 0.9 percent on concerns over tight world supplies amid a grain port strike in Argentina, the world's largest soyoil exporter. The most active September soyoil contract on China's Dalian Commodity Exchange rose 1.8 percent. Brent crude closed in on $100 a barrel on Monday on concern anti-government protests in Egypt could spark instability elsewhere in the Middle East and North Africa, a region that produces almost 40 percent of the world's oil.