Palm oil up nearly 3pc on fears of more Malaysian plantation closures

• Palm has been pressured by demand uncertainties as major importing countries, including India, impose lockdowns to check the coronavirus spread.
• Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
• Crude oil prices also rose on Tuesday amid hopes that the world's biggest producers will agree to cut production, even though analysts cautioned it may do little to boost demand.

KUALA LUMPUR: Malaysian palm oil futures climbed as much as 3.5pc on Tuesday on fears that Malaysia, the world's second biggest producer, would suspend more plantations as it steps up coronavirus containment efforts, while stronger soybean oil also supported prices.

The benchmark palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange closed up 65 ringgit, or 2.9pc, to 2,315 ringgit ($534.03) per tonne, its biggest daily rise since March 20.

Palm spiked in the afternoon session on fears that Malaysia's biggest palm producing state, Sabah, would extend its shutdown orders on some plantations after Sabah state chief minister Shafie Apdal said he would discuss the closure at a cabinet meeting.

"The market is pricing in a worst case scenario of more closures," Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari Sdn Bhd, said.

Palm has been pressured by demand uncertainties as major importing countries, including India, impose lockdowns to check the coronavirus spread.

"Although palm oil supply is being negatively impacted by government containment measures as plantation operations are being disrupted, we believe demand destruction will be greater and send prices lower," Fitch Solutions said in a research note.

Fitch Solutions forecast palm oil prices to trade at an average price of 2,300 ringgit ($529.34) a tonne this year.

Dalian's most-active soyoil contract gained 1.71pc, while its palm oil contract rose 1.57pc. Soyoil prices on the Chicago Board of Trade were also trading up 1.45pc.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

Crude oil prices also rose on Tuesday amid hopes that the world's biggest producers will agree to cut production, even though analysts cautioned it may do little to boost demand.

Stronger crude oil futures make palm a more appealing option for biodiesel feedstock.