Malaysian palm oil futures rose to their highest in one-and-a-half weeks on Wednesday, marking a second consecutive session of gains, helped by tight supplies and improving exports. Benchmark palm oil futures for March delivery on the Bursa Malaysia Derivatives Exchange were up 0.1 percent at 3,130 ringgit ($699) a tonne at the close of trade, after touching a high of 3,153 ringgit earlier in the day, its strongest since December 19.
Traded volumes stood at 37,024 lots of 25 tonnes each at the end of the trading day, below the 2015 daily average of 44,600 lots. "The market was caught by surprise as exports improved," said a Kuala Lumpur-based trader, referring to cargo surveyor data, which showed that exports fell less than expected.
"Production is bad and physical prices are still high. I think (prices) will test highs again." Malaysian palm oil shipments showed that falls in exports were slowing. Exports fell 5-7 percent in the December 1-25 period from the previous month, compared with a 14-17 percent fall during December 1-20.
Demand for the tropical oil usually weakens at the end of the year from major buyers India and China, as palm solidifies due to the cold weather. Production in Malaysia, the world's second largest producer, usually drops in the final quarter of the year as the fruit-harvesting process is disrupted by rainfall, contributing to tight supplies. In related vegetable oils, the March soyabean oil contract on the CBOT was down 0.3 percent, while the May soyabean oil contract on the Dalian Commodity Exchange rose 1 percent.
The May contract for Dalian palm olein rose 1.1 percent. Palm prices are impacted by the performance of other rival edible oils, as they compete for a share in the global vegetable oils market.
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