Palm oil sees biggest weekly jump in nearly 3 years on bullish exports despite India's boycott call
- The benchmark palm oil contract for January delivery on the Bursa Malaysia Derivatives Exchange rose for the fourth straight session.
- It rose by as much as 7.5% for the week in its biggest jump since Nov. 11, 2016.
- Prominent group of Indian traders has called for a boycott of Malaysian palm oil following Mahathir’s remarks on Kashmir.
SINGAPORE: Malaysian palm oil futures extended gains and saw their biggest weekly jump in nearly three years on the back of improved export sentiment despite India — the third biggest market — called for a boycott.
On Monday, India’s Solvent Extractors’ Association president Atul Chaturvedi reportedly advised its members not to buy palm oil products from Malaysia to protest against Prime Minister Tun Dr Mahathir Mohamad’s remarks on the Kashmir conflict.
Despite call of boycott from the third biggest market, the benchmark palm oil contract for January delivery on the Bursa Malaysia Derivatives Exchange rose for the fourth straight session on Friday, and closed to trade 0.6% higher at 2,398 ringgit ($573.07) per tonne.
It rose by as much as 7.5% for the week in its biggest jump since Nov. 11, 2016.
The rally was fuelled by palm oil exports data for October 1-25, which is seen to have risen significantly from the previous month, traders told Reuters. Independent inspection company AmSpec Agri Malaysia said on Friday that Malaysia's Oct. 1-25 exports were see up 13% from the month earlier.
"Malaysia palm oil export for October seen recovering... is one of the key factors for the bullish momentum," said Anilkumar Bagani, research head of Sunvin Group, a Mumbai-based vegetable oil broker.
Adding to bullish export sentiments, Malaysia and Indonesia are expected to require fuel to have 20% and 30% bio-content in the form of palm oil respectively.
Malaysia said this week that implementation of the neighbours' biofuels mandates will boost annual consumption up to 1.3 million tonnes and 10 million tonnes a year respectively, adding that they would challenge a European Union law to limit palm oil use in biofuels.
Prices were also buoyed by a rally in palm oil on China's Dalian Commodities Exchange, a trader based in Kuala Lumpur told Reuters.
Dalian's January palm oil contract hit a record of 5,124 yuan ($724.70) per tonne on Friday. It last rose 2.8% while the January soyoil contract traded up 1.6%.
Analyst Bagani said the surge was probably due to a weaker yuan currency and higher cost and freight, making imported palm oil more expensive and less attractive.
Elsewhere, US soyoil futures on the Chicago Board of Trade last traded 0.5% lower on Friday.
Palm oil is affected by price movements in related oils as they compete for share in the global vegetable oils market. Traders buy Malaysian palm oil if rival oils are more expensive, so driving up the price.
Further helping prices was also a weaker ringgit currency, which last fell 0.04% against the dollar, making the edible oil cheaper for holders of foreign currencies.
Palm oil may rise into a range of 2,665 to 2,760 ringgit over the next four weeks, Reuters analyst Wang Tao said. The contract is riding on a powerful wave c or wave 3, both of which could travel to 2,760 ringgit, the 161.8% projection level. A double-bottom has been confirmed, suggesting a similar target.