Palm oil soars

Malaysian palm oil futures ended higher on Friday on concerns over monsoon rains hurting output and as crude prices ticked up, but the recovery was not enough to keep palm from its biggest weekly fall in three. Brent crude oil rose above $60 a barrel on Friday, recovering from near a 5-1/2-year low as investors squared books ahead of the year-end festive break after six months of falling prices.
But oil prices were on track for a fourth straight week of declines, with Brent and US crude having nearly halved in value since June. Cheaper oil prices makes palm a less attractive feedstock option for biodiesel producers. "People are cautious. The world economy looks very gloomy and investors are worried about demand - crude is still weak, we're not sure whether in the coming months biofuel demand will still be there," said a trader with a foreign commodities firm in Kuala Lumpur.
The benchmark March contract on the Bursa Malaysia Derivatives Exchange had edged up 0.2 percent to 2,153 ringgit ($620) per tonne by Friday's close, pulling up from an intraday low of 2,127 ringgit. Total traded volume stood at 39,350 lots of 25 tonnes, above the daily average of 35,000 lots. Technicals were bearish. Palm oil may break support at 2,116 ringgit per tonne and fall further, as it seems to have completed a rebound triggered by this level, according to Reuters market analyst Wang Tao.
Despite the small uptick, Malaysian palm prices, which set the tone for global prices, lost 0.8 percent this week to post their biggest weekly fall since late November, as volatility in crude and soy oil markets dragged. Market players are also turning cautious over warnings of heavy rains and an "orange stage" alert issued by Malaysia's meteorological department.
Heavy intermittent rains are expected over the palm-growing states of Pahang and Johor until Saturday, the department's website showed. From Sunday to Tuesday, moderate rainfall is forecast for the two states. Parts of Malaysia's east coast states of Kelantan and Teregganu have already been hit by floods, displacing around 26,000 people, according to local media reports. In competing vegetable oil markets, the most active May soybean oil contract on the Dalian Commodity Exchange fell 0.7 percent in late Asian trade, while the US soyoil contract for January crept up 0.3 percent.