Palm Oil Posts Weekly Gain Amid Production Worries

Jakarta: Malaysian palm oil futures closed sharply higher on Friday, notching a weekly gain of 1.6% amid concerns over production cuts in key palm oil-growing regions of Malaysia.

The benchmark palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange rose 147 ringgit, or 3.28%, to close at 4,627 ringgit ($1,048.73) a tonne.

"Futures rallied sharply amid concerns over reduced output in Malaysia's key palm oil-producing regions, coupled with opportunistic buying and heavy short-covering," said Anilkumar Bagani, head of research at Mumbai-based vegetable oil broker Sunvin Group.

Palm oil plantations in two Malaysian states — the world's second-largest producer of the commodity — have been hit by a pest outbreak, a minister said, even as the country recovers from floods that had also disrupted output.

A Reuters survey showed Malaysia's palm oil stocks fell in February to their lowest level in nearly three years because of the flooding.

Malaysian Palm Oil Rises

Indonesia exported 29.5 million tonnes of palm oil products last year, down 8.3% from the previous year, according to data released on Thursday by the Indonesian Palm Oil Association (GAPKI).

Meanwhile, India bought a large volume of palm oil this week after unusually low purchases in January and February had led to a sharp drawdown in stocks, according to a Mumbai-based trader.

India's palm oil imports rose 36% in February from the previous month, having fallen in January to their lowest level since March 2011.

The most actively traded soybean oil contract on the Dalian exchange gained 1.48% after data on Thursday showed US soybean oil exports in January hit their highest level in 15 years. Dalian's palm oil contract also rose 2.89%, while soybean oil on the Chicago Board of Trade (CBOT) fell 0.35%.

Palm oil is influenced by the price movements of competing vegetable oils, as it competes for a share of the global vegetable oils market.

The ringgit, the currency used in palm oil trade, strengthened 0.38% against the US dollar, making the commodity more expensive for buyers.

Source: Reuters