KUALA LUMPUR: Malaysian palm oil futures rose for a second straight day on Monday, underpinned by flooding across the world’s second-largest producer, although gains were limited after another COVID-19 outbreak in key market China.
The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange closed 14 ringgit, or 0.36%, higher at 3,932 ringgit ($889.19) a tonne.
The market is firm, with reports of flooding in many parts of Malaysia and also on a leading analyst’s bullish view on the market, said Mitesh Saiya, trading manager at Mumbai-based trading firm Kantilal Laxmichand & Co.
Leading industry analyst Dorab Mistry said on Saturday that Malaysian palm oil is expected to trade at between 3,500 ringgit and 5,000 ringgit per tonne until the end of May as stocks in the commodity’s top two producer countries deplete.
“Malaysian stocks will be drawn down until May 2023 and will go below 2 million tonnes. The Indonesian B35 (blending) programme may keep stocks tight in the first half of 2023,” Mistry told an industry conference.
On the other hand, optimism was dampened by worries that demand in key market China would be affected due to fresh COVID outbreaks.
China is in the first of an expected three waves of COVID cases this winter, with further waves expected as people return en masse to their home areas for the Lunar New Year holiday next month, according to the country’s chief epidemiologist.
Dalian’s most-active soyoil contract fell 1.9%, while its palm oil contract eased 1.2%. Soyoil prices on the Chicago Board of Trade were up 0.7%.
The market’s upside could also be limited by sluggish exports.
“Malaysia’s palm oil exports to key destinations might take a breather after experiencing strong shipments in the prior month. Also, lower palm oil outputs have partly led to falling exports,” Refinitiv Agriculture Research wrote in a note.
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