Palm reverses early gains on higher output, container shortage

KUALA LUMPUR: Malaysian palm oil futures reversed early gains on Wednesday, pressured by rising production and as the global container crisis disrupted shipments.

The benchmark palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange slipped 21 ringgit, or 0.56%, to 3,705 ringgit ($897.75) a tonne by the midday break, down for a fourth session in five.

"Slowly but surely production is gathering traction," said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.

On Monday, the Malaysian Palm Oil Board reported a higher-than-expected 28% monthly rise in March production, indicating a recovery in output after six months of decline.

"There are also some delays in shipments. According to market players, freight charges have gone up much higher and there is a shortage of shippping containers, so they are unable to export," Paramalingam said.

Investors now await April 1-15 export data from cargo surveyors scheduled to be released on Thursday.

Dalian's most-active soyoil contract rose 1.3%, while its palm oil contract gained 1.4%. Soyoil prices on the Chicago Board of Trade were down 0.2%.

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

Crude climbed after industry data showed US oil inventories declined more than expected and OPEC raised its outlook for oil demand.

Stronger crude oil futures make palm a more attractive option for biodiesel feedstock.

Palm oil looks neutral in a range of 3,659-3,761 ringgit per tonne, and an escape could suggest a direction, Reuters technical analyst Wang Tao said.