Malaysian Palm Oil Hits 6-Month High On Tight Supply, Monsoon Woes

KUALA LUMPUR: Malaysian palm oil futures rose for a third day to hit a near six-month high on Thursday, on fears that supplies of the tropical oil will be further tightened by another round of monsoon rains in the No.2 grower. 

The Malaysian Meteorological Department raised its weather warning on Thursday to an “orange stage” from a “yellow stage”, and forecast the states Johor, Pahang, Terengganu and Kelantan to receive heavy rains until the end of the week.

Johor and Pahang are the top palm-producing states in Peninsular Malaysia and account for 30 percent of the country’s palm output this year, according to the Malaysian Palm Oil Board. 

“Supply in the near term is tight. We don’t know what the damage will be for January,” said a trader with a foreign commodities brokerage in Malaysia. The trader added that until worries of floods ease, prices will likely remain propped up between 2,320 ringgit and 2,420 ringgit.  

The benchmark March contract hit its highest since July 11 before settling with a 1.7 percent gain at 2,369 ringgit ($665) per tonne by Thursday’s close. The contract hit a high of 2,379 ringgit in late trade.

Total traded volume stood at 47,148 lots of 25 tonnes, above the usual 35,000 lots.    

Traders said the palm oil contract was earlier anticipated to be weak as crude oil prices plunged and dented palm’s biodiesel uptake.

But monsoon flooding, worse than usual last year, disrupted harvesting and logistics in some parts of Peninsular Malaysia. The squeeze in supplies may now last longer than expected, industry players say.

A fall in the Malaysian ringgit also helped boost benchmark prices nearly 25 percent from its over five-year low of 1,914 ringgit touched in September. 

“What happened at end-December is that the floods came into the picture and the ringgit continuously weakened,” the Malaysia-based trader added.

“The bearishness in crude is being ignored. Those who sold earlier are buying back.”

The Malaysian currency, which has faced intense selling pressure over the past few weeks from concerns that tumbling oil prices would impact the country’s fiscal position, pulled off 5-1/2-year lows against the dollar on Thursday to rise 0.4 percent to 3.5650.

Brent bounced around $51 a barrel on Thursday as bulls and bears tugged at both ends in their search for a bottom in the second-biggest price rout on record.

In other vegetable oil markets, the U.S. soyoil contract for March rose 0.8 percent in late trade, while the most active May soybean oil contract on the Dalian Commodity Exchange gained 0.6 percent.  

Palm, soy and crude oil prices at 1003 GMT   

Contract Month Last Change Low High Volume
MY PALM OI JAN5 2380 +31.00 2370 2380 165
MY PALM OIL FEB5 2383 +37.00 2349 2389 2141
MY PALM OIL MAR5 2369 +39.00 2331 2379 21112
CHINA PALM OLEIN MAY5 5062 +30.00 5038 5088 473784
CHINA SOYOIL MAY5 5736 +36.00 5712 5772 434430
CBOT SOY OIL MAR5 33.44 -0.70 33.15 33.60 4868
INDIA PALM OIL JAN5 468.00 -0.70 467.00 473.90 1193
INDIA SOYOIL JAN5 669.00 +0.00 667.20 675.00 26685
NYMEX CRUDE FEB5 48.78 +0.13 48.42 49.65 36749

  Palm oil prices in Malaysian ringgit per tonne
  CBOT soy oil in U.S. cents per pound
  Dalian soy oil and RBD palm olein in Chinese yuan per tonne
  India soy oil in Indian rupee per 10 kg
  Crude in U.S. dollars per barrel
($1 = 3.5650 Malaysian ringgit)    
($1 = 6.2145 Chinese yuan)
($1 = 62.64 Indian rupee)
– Reuetrs


Source : The Star


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