SINGAPORE: Malaysian palm oil rose for a second straight session on Monday, gaining 1.7% on support from strong demand from top importer India, although China’s denial that it was considering easing its zero COVID-19 policy capped the gains.
The benchmark palm oil contract on the Bursa Malaysia Derivatives Exchange closed 73 ringgit higher, or 1.7%, to 4,440 ringgit ($937.10) a tonne. The contract climbed more than 9% last week.
“Demand from India and other South Asian countries is very strong,” said one Singapore-based trader. “Palm oil is much cheaper than soybean oil and other soft oils.”
Palm oil prices are likely to strengthen further as excessive rain in key producing countries curbs output, while demand increases for its use in food and biofuels, industry officials said.
China reported its highest number of new COVID-19 infections in six months on Sunday, a day after health officials said they were sticking with strict coronavirus curbs, dousing recent hopes for an easing.
The global outlook for palm oil remains uncertain, with strict pandemic policies in major importer China weighing on demand, while high energy prices and a slowdown in output provide support, leading industry analysts said at a conference on Friday.
Malaysia’s benchmark palm oil contract is expected to trade between 3,500 ringgit and 4,500 ringgit per tonne until the end of March next year, leading industry analyst Dorab Mistry said.
Thomas Mielke, head of Hamburg-based analyst firm Oil World, said global palm oil output was seen rising by 2.9 million tonnes in the 2022/23 season, but noted output yield had been on a downtrend in recent years, which he said was “alarming”.
Malaysia’s palm oil inventories at end-October likely rose to a three-and-a-half-year high as production improved while imports slumped, a Reuters survey showed on Friday.
Stockpiles were pegged to rise 9.3% from September to 2.53 million tonnes, the largest since April 2019, according to the median estimate of eight traders and analysts polled by Reuters.
Indonesia’s palm oil and kernel oil production is expected to edge down to 51.3 million tonnes this year, from 51.6 million tonnes in 2021, an Indonesia Palm Oil Association (GAPKI) executive told an industry conference on Friday.
In related edible oils, Dalian’s most-active soyoil contract fell 0.2%, while its palm oil contract gave up 0.1%.
Palm oil may retest a support at 4,264 ringgit a tonne, a break below which could open the way towards a 4,072-4,135 ringgit range, according to Wang Tao, a Reuters technicals analyst for commodities and energy.