Malaysian palm oil futures extended gains on Friday, as worries over heavy rains stalling harvesting lifted prices. Palm oil is set to post its first monthly loss in seven months, although traders expect the market to gain in the coming days as rains continue to reduce harvesting rounds in key Malaysian oil palm growing regions.
Some were concerned that the flash floods in the top palm oil producing region of Johor in southern Malaysia may disrupt logistics but other traders said it was premature to predict the impact.
"The floods are not really serious and we are in a low production period, but if heavy rains continue in Johor for more than a week, we may have a problem," said industry analyst M.R. Chandran. The benchmark April crude palm oil contract on Bursa Malaysia Derivatives settled up 0.4 percent to 3,700 ringgit ($1,212) per tonne. Traded volume stood at 16,934 lots at 25 tonnes each, compared to the usual 15,000 lots as investors squared positions ahead of the Lunar New year holidays next week.
Refiners are also slowing production, leading to less demand for crude palm oil and tight refined palm oil supplies next week. A Reuters technical analysis showed palm oil is technically neutral, flat within a range of 3,655 ringgit to 3,723 ringgit per tonne, but the bias is on the downside.
Higher US soyoil prices in the previous session supported palm oil gains. But traders warn there may be some selling pressure as heavy rains benefit the competing Argentine soy crop in its critical pod-setting stage. US soyoil for March delivery fell 0.6 percent in Asian trade hours on Friday, and the most active September soyoil contract on China's Dalian Commodity Exchange barely moved in slow trading. US crude futures fell on Friday to a near two-month low on weak economic data and talk of Opec raising output to cool prices, while a rosier outlook for Europe supported Brent.