Palm oil recovers from Tuesday's sharp drop on lower output expectations

• The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange rose as much as 9.1pc in early trade.
• China's Dalian Commodity Exchange is closed for the Lunar New Year holidays and will open on Feb. 3.
• Palm oil prices were also seeing some support from likely lower production in January, two traders said.

The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange rose as much as 9.1pc in early trade.

However, it pared some gains to trade 6.6pc higher at 2,746 ringgit ($675.52) per tonne by the midday break.

The market is correcting after the tumble on Tuesday, a Kuala Lumpur-based trader said.

"How far the recovery can go, though, we don't know. We have to see when markets in China open," he added.

Palm oil prices dropped 10pc on Tuesday in their biggest drop in over a decade as the death toll from the virus rose sharply in China and some health experts questioned whether Beijing can contain the virus which has spread to more than 10 countries, including France and the United States.

China's Dalian Commodity Exchange is closed for the Lunar New Year holidays and will open on Feb. 3.

Palm oil prices were also seeing some support from likely lower production in January, two traders said.

Dry weather and lower fertiliser use, a move adopted by some growers to cut costs, reduced output last year and are likely to lead to lower production this year.

A 1.7pc jump in soyoil prices on the Chicago Board of Trade also lent some support to palm oil.

Palm oil is generally affected by price movements in related oils as its competes for a share in the global vegetable oil market.