KUALA LUMPUR: Malaysian palm oil futures edged higher on Monday, supported by stronger export demand and the anticipation of weaker production in the weeks ahead.
The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange gained 55 ringgit, or 1.36%, to 4,091 ringgit ($1,007.64) a metric ton at the close. The contract fell 0.17% in the previous session.
The market ended higher on anticipation of weaker output growth in the coming weeks despite MPOB reporting higher stock levels in the country, said David Ng, a proprietary trader at Kuala Lumpur-based trading firm Iceberg X Sdn Bhd.
Malaysia’s palm oil inventories surged in December to a near seven-year high, breaching the psychologically important 3-million-metric-ton threshold, as the strongest monthly output in eight years eclipsed only a modest rebound in exports.
Cargo surveyors estimated that exports of Malaysian palm oil products for January 1-10 rose between 17.7% and 29.2% from a month earlier.
Dalian’s most-active soyoil contract gained 0.3%, while its palm oil contract rose 0.93%. Soyoil prices on the Chicago Board of Trade were up 1.03%.
Palm oil tracks price movements of rival edible oils, as it competes for a share of the global vegetable oils market.
Oil prices dipped, after Iran said it had “total control” following weekend violence, easing some concerns over supply from the OPEC producer, while investors also weighed efforts to resume oil exports from Venezuela.
Weaker crude oil futures make palm a less attractive option for biodiesel feedstock.
Malaysian palm oil futures are likely to remain under pressure until production eases, after output stayed higher than expected, particularly in Malaysia, and led to a buildup in inventories, industry analyst Dorab Mistry said.
The ringgit, palm’s currency of trade, strengthened 0.25% against the dollar, making the commodity more expensive for buyers holding foreign currencies.
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