Palm oil gains over 2%, logs first weekly gain in three

KUALA LUMPUR: Malaysian palm oil futures rose more than 2% on Friday and logged their first weekly gain in three, lifted by better exports so far in June and a tight supply situation.

The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange settled up 99 ringgit, or 2.89%, at 3,520 ringgit ($847.38) a tonne, its highest close since June 15.

It gained 2.8% for the week.

The slow pace of arrivals of crude palm oil at refiners is tightening the supply of processed palm oil, said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.

Plantations and mills in Malaysia are facing labour shortages and reduced capacity due to coronavirus-induced restrictions.

"With a weakening ringgit, demand pace recovery and excellent refining margins, prices are almost certain to remain defensive in the coming days," he said.

Exports from Malaysia during June 1-25 rose between 3.4% and 7.5% from the same period in May, cargo surveyors said.

"On the demand front, we believe replenishment activities to import more palm oil will continue to be healthy into the 2021 calendar year on the back of more reopening of economic activities," MIDF Research said in a note.

Crude palm oil prices will soften in the second half of the year as production is expected to recover, but the supply tightness will likely remain until the third quarter due to slow output growth, it said.

Dalian's most-active soyoil contract rose 0.6%, while its palm oil contract gained 1.2%. Soyoil prices on the Chicago Board of Trade were up 1.8%.

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