Palm oil flat, logs 2pc weekly rise on supply worries

KUALA LUMPUR: Malaysian palm oil futures ended flat on Friday, but logged a 2.5% weekly rise as wet weather conditions and COVID-19 curbs fuelled concerns over supply.

The benchmark palm oil contract for January delivery on the Bursa Malaysia Derivatives Exchange was unchanged at to 2,943 ringgit ($709.16) a tonne at the closing bell, after falling to an intraday low of 2%.

While the contract was trading lower, the outlook for palm is bullish with Malaysia's production expected to be flat in October as coronavirus-related lockdowns limit harvesting and milling activities, a Singapore-based trader said.

Malaysia's biggest palm producing state Sabah, which has become the epicentre of the coronavirus outbreak, on Tuesday released new guidelines limiting plantation and mills to half capacity and capping operating hours to 6 a.m.-6 p.m.

Malaysian Estate Owners' Association warned that the new restrictions could see the state's crude palm oil production fall by as much as 300,000 tonnes a month.

Output has also been hit by rainy weather in top producers Malaysia and Indonesia due to a La Nina weather pattern. The wetter-than-normal weather is expected to last until the end of the year, according to a Refinitiv report on Wednesday.

"Exports show positive signal of higher demand from India, and China may receive more shipments in second half of the month after long holidays during the first week of October," the trader said.

Further hurting sentiment is uncertainty over the political situation in Malaysia, after reports of the Prime Minister seeking to declare a state of emergency, which includes suspending parliament.

Dalian's most-active soyoil contract rose 1.1% while its palm oil contract gained 0.8%. Soyoil prices on the Chicago Board of Trade were up 0.1%.

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