Palm climbs 3pc to 8-1/2 year high on forecasts of tightening stockpile

KUALA LUMPUR: Malaysian palm oil futures climbed 3pc on Friday, hitting more than 8-year highs, on forecasts of tighter November and December supply and bullish outlook from leading analysts.

The benchmark palm oil contract for February delivery on the Bursa Malaysia Derivatives Exchange closed up 105 ringgit, or 3.2pc, to 3,437 ringgit ($846.97) a tonne, its highest since May 5, 2012.

The contract rose 3pc for the week, rising for a sixth week in seven.

After weeks of speculation, Indonesia on Thursday said it would impose higher levies on crude palm oil starting Dec. 10, a move that could impact demand next year.

The market has mostly priced in the levy and apart from some sentimental drive, the sustainability of higher prices would be difficult unless strong demand from key buyers India and China returns, said Anilkumar Bagani, research head of Mumbai-based vegetable oils broker Sunvin Group.

Palm oil demand has nosedived in China due to high prices and crude palm oil import margins in India have been hit by a steep rise in cash market prices at origin, Bagani said.

Malaysia's palm oil inventories in November likely dropped 2pc from the previous month to 1.54 million as production fell, a Reuters survey showed. Output is likely to have dropped 10pc to 1.55 million tonnes, hitting an eight-month low.

Malaysia's palm oil production in 2020 is likely to be 19.2 million tonnes, with December stocks falling to as low as 1.4 million tonnes, palm analyst Dorab Mistry said in a virtual conference on Thursday.

Dalian's most-active soyoil contract rose 2.7pc, while its palm oil contract gained 1.3pc. Soyoil prices on the Chicago Board of Trade were up 0.2pc.

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