KUALA LUMPUR: Malaysian palm oil futures reversed early losses on Tuesday to scale to their highest closing in a month, as traders assessed slow exports against forecasts of a steep drop in supply ahead of key data.
The benchmark palm oil contract for July delivery on the Bursa Malaysia Derivatives Exchange closed up 42 ringgit, or 1.12%, to 3,804 ringgit ($857.72) a tonne, extending a four-session winning streak.
Palm earlier fell as much as 2.45%.
“Market is pricing in a possible dip in end-April stocks and the weather vagaries that comes along with the emergence of El Niño,” said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.
The Malaysian Palm Oil Board (MPOB) is scheduled to release data for April supply and demand on Wednesday, with surveys indicating slowing exports amid a steep drop in inventories and production.
Many are bracing for bullish sentiment, leading to the short covering seen this week, Paramalingam said.
“We are not expecting production to return to normalcy anytime soon, thus end stocks will remain low and that will keep prices defensive,” he added.
In related oils, Dalian’s most-active soyoil contract fell 1.2%, while its palm oil contract lost 0.1%. Soyoil prices on the Chicago Board of Trade were up 0.4%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
The United Nations said no ships were inspected on Sunday or Monday under a deal allowing the safe Black Sea export of Ukraine grain, which Moscow has threatened to quit on May 18 over obstacles to its own grain and fertilizer exports.