Palm Oil at 30-Month High on Supply Fears

Palm

oil futures climbed to the highest level in almost 30 months on

speculation that a drop in November output and stockpiles in Malaysia,

the second-largest producer, may strain global supplies.

February-delivery

futures gained as much as 1.1 percent to 3,671 ringgit (US$1,172) a

metric ton, the highest since June 17, 2008, and traded at RM3,668 at

11:53 a.m. local time. The contract climbed 3.3 per cent last week.

“The

production outlook for December is looking no better as rainy weather

continues to plague estates and the sector is going into its seasonal

down cycle which typically occurs in the January-March period,” Bernard

Ching, an analyst at ECM Libra Capital Sdn Bhd, said in a report today.

Output

in Malaysia fell to the lowest level in five months while stockpiles

slid for the first time in four months. Heavy rainfall caused by a La

Nina weather event has reduced oil-palm yields in Indonesia and

Malaysia, the biggest producers.

Production declined 11 percent to 1.46 million tons last month from 1.64

million tons in October, according to data from the Malaysian Palm Oil

Board. Inventory dropped 8.7 per cent to 1.64 million tons from 1.79

million tons, and exports gained 2.7 percent to 1.5 million tons.

Malaysian

inventory may decline further with a pick-up in demand for the festival

season, Ching said. Chinese purchases rise before the Lunar New Year,

when demand for food soars. The celebration will take place in early

February. – Bloomberg

Source : Business Times

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