Palm oil climbs to near 10-month high on tight supply outlook

KUALA LUMPUR: Malaysian palm futures hit a near 10-month high on Wednesday, riding on expectations of a drop in October stockpiles and lower output, although volatile global trading ahead of the US election results limited gains.

The benchmark palm oil contract for January delivery on the Bursa Malaysia Derivatives Exchange gained 60 ringgit, or 1.95%, to 3,130 ringgit ($751.86) a tonne, its highest level since Jan. 13.

The market is speculating on lower production in Malaysia, a Singapore-based trader said.

October production likely fell 6% from the month before, while inventories were seen down 8%, as COVID-19 restrictions and a labour shortage hamper harvesting, Ivy Ng, regional head of plantations research at CGS-CIMB Research, said in a note.

Supply in top producing Southeast Asian countries have also been squeezed by a La Nina-induced wet weather.

Refinitiv Commodities Research said a moderate to strong La Nina is expected to last from December to February, with a northeast monsoon expected to arrive in Malaysia in November.

"While wet weather is likely to be generally beneficial for palms, localized thunderstorms may prolong flooding concerns, warranting attention," Refinitiv said.

Meanwhile, palm oil imports into the European Union and Britain in the 2020/21 season totalled 2.05 million tonnes, up 2% from the previous session, official EU data showed on Tuesday.

Share markets veered higher in wild Asian trading as results from the US presidential election proved far closer than polls had predicted, leaving the outcome deeply in doubt.

Dalian's most-active soyoil contract were up 2%, while its palm oil contract rose 2.4%. Soyoil prices on the Chicago Board of Trade gained 0.4%.

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