Palm oil gains on surging crude prices, El Niño worries

JAKARTA: Malaysian palm oil futures rose on Monday, tracking a rally in crude oil pricesand strength in Dalian vegetable oils, while renewed worries about El Niño also helped pull prices higher.

The benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange was up 39 ringgit, or 0.85%, at 4,636 ringgit ($1,134.33) a metric ton by the midday break.

“BMD CPO futures opened gap higher following bullish rally in energy prices and in CBOT Soy oil futures from Friday and in Chinese vegetable oil futures in Asian hours today.

Talks of a super strong El-Nino have once again started gaining traction, helping palm oil prices move higher,“ said Anilkumar Bagani, commodity research head at brokerage Sunvin Group.

Dalian’s most-active soyoil contract gained 0.51%, while its palm oil contract rose 1.16%. Soyoil prices on the Chicago Board of Trade increased 0.06%. Palm oil tracks the price movements of rival edible oils, as it competes for a share of the global vegetable oils market.

Brent oil prices rose 2% to more than $90 per barrel on Monday, as escalating US-Iran hostilities in the Middle East restricted oil shipments through the Strait of Hormuz.

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

Meanwhile, Malaysia is expected to see record high temperatures next year as El Niño strengthens, its meteorological department told Reuters, stoking worries about lower palm oil production.

The US Climate Prediction Center says El Nino has strengthened over the past month and is forecast to intensify through 2026 and continue through early 2027.

Palm oil may retest a resistance at 4,613 ringgit per metric ton, a break above could lead to a gain to the July 9 high of 4,630, Reuters technical analyst Wang Tao said.