The weaker US dollar also boosted market sentiment, as investors favoured commodity and equity plays over the greenback on signs the US economy would start to recover.
Traders say Malaysian palm oil exports will become cheaper as many of the products sold are priced in US dollars.
The benchmark March contract on the Bursa Malaysia Derivatives Exchange settled RM2 higher at RM2,682 after touching RM2,703, a level unseen since May 15 last year.
“Palm oil is set to make its biggest gains for the year in the first three months of the year with that combination of incoming Chinese demand, the weaker US dollar and stronger commodity markets,” said a trader with a local brokerage.
Traders and analysts expect Chinese demand for vegetable oils to surge in the run-up to Lunar New Year in mid-February.
China annually buys about 6 million tonnes of palm oil and much of the purchases happen in the first half of the year.
“There is no specific report saying that traders are buying in preparation for Chinese New Year but I won’t deny they might be stocking up for the festival,” said an analyst who tracks palm oil in the Chinese port city of Dalian.
Crude oil advancing towards US$82 (US$1.00 = RM3.39) a barrel supported other vegetable oil markets. The US soyoil for January delivery slipped due to rising global supplies but crude oil’s gains limited losses.
The most-active September soybean oil contract on China’s Dalian Exchange edged higher.
Source : Business Times