Palm oil futures touched a more than two-year high on Friday, lifted by prospects of lower production and stockpiles, and costlier soyaoil on the Chicago Board of Trade, but cheaper rival oils on the Dalian capped gains.
The benchmark palm oil contract on the Bursa Malaysia Derivatives Exchange closed 2.9% higher to 2,743 ringgit ($657.79) per tonne. Earlier in the session, it hit 2,755 ringgit, the highest price since Nov. 16, 2017. The contract traded 0.4% lower in early trade.
The recovery was due to expectations of lean supply and stocks, two Kuala Lumpur-based traders said.
Leading industry analyst James Fry on Wednesday said that top palm oil producers Indonesia and Malaysia is expected to see little growth in output next year, potentially leading to a supply deficit and higher prices.
"The buying momentum is still there but if bean oil drops further, there may be some adjustments to palm prices," one of the traders added.
A 1% jump in soyaoil on the Chicago Board of Trade also pushed up palm prices. It traded lower in its previous session due to US-China trade war concerns.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oil market.
Dalian's January palm oil contract last traded down 0.6% a tonne, while the soyaoil contract fell 0.8%.
Profit-taking dragged it lower from record highs earlier in the week, said Anilkumar Bagani, the research head of Sunvin Group, a vegetable oil broker based in Mumbai, India.
A weaker ringgit further supported prices. It fell 0.1% against the dollar, making the edible oil cheaper for holders of foreign currencies.
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