Palm stays rangebound on El Niño concerns

KUALA LUMPUR: Malaysian palm oil futures traded in a tight range on Monday, as traders looked past near-term consolidation to price in the risk of an El Niño-driven output disruption next year.

The benchmark palm oil contract for November delivery on the Bursa Malaysia Derivatives Exchange inched up 0.19% to 4,816 ringgit ($1,181.84) a metric ton by the midday break.

The contract fell 0.3% in the previous session.

The crude palm oil futures market remained in contango, with far-month contracts, particularly the February to May 2027 tranche, trading above 5,000 ringgit on Monday, a Kuala Lumpur based trader said.

“The firm pricing in the forward months suggests that some market participants are positioning for potential supply tightness in 2027, amid expectations that an El Niño-related weather pattern could weigh on palm oil production,” the traded added.

The Dalian Commodity Exchange’s most-active soyoil contract rose 0.55%, while its palm oil contract added 0.25%.

Soyoil prices on the Chicago Board of Trade were down 0.07%.

Palm oil tracks the price movements of rival edible oils, as it competes for a share of the global vegetable oils market. Oil prices rose as fading expectations of a US-Iran peace breakthrough and slower tanker traffic through the Strait of Hormuz reinforced geopolitical risk concerns in the market.

Stronger crude oil futures make palm a more attractive option for biodiesel feedstock. The ringgit, palm’s currency of trade, strengthened 0.22% against the dollar, making the commodity slightly more expensive for buyers holding foreign currencies.

Cargo surveyor Intertek Testing Services estimated that exports of Malaysian palm oil products for August 1-15 fell 7.9% from a month earlier, while AmSpec Agri Malaysia is expected to release its estimates later in the day.

Indonesian President Prabowo Subianto announced a plan to create a new exchange that will set prices for the country’s strategic commodities by the start of next year, in a fresh gambit to leverage the country’s vast natural resources to boost growth.

Palm oil may test a support at 4,696 ringgit per metric ton, a break below which could trigger a fall to 4,674 ringgit, Reuters technical analyst Wang Tao said.