Palm oil climbed for a fifth day to a two-month high on speculation that inventories in Malaysia may decline for a fifth month as output slows and exports recover in the world’s second-biggest producer.
The contract for August delivery advanced as much as 1.3 percent to 2,420 ringgit ($792) a metric ton on the Bursa Malaysia Derivatives, the highest level for the most active contract since March 28, before ending the morning session at 2,419 ringgit in Kuala Lumpur. Futures are up 5.8 percent in May, heading for the biggest monthly gain since February 2012, on expectation demand may rebound ahead of the Muslim fasting month of Ramadan, which starts in July this year.
“People were concerned earlier about weak demand but it has picked up and that is positive,” said Ivy Ng, an analyst at CIMB Investment Bank Bhd. “The expectations of softer production in May because palm trees are having a bit of a breather could lead to lower palm oil stocks.”
Malaysian reserves have dropped 27 percent to 1.93 million tons in April from a record in December, according to data from the nation’s palm oil board. Output rose 3.1 percent to 1.37 million tons in April, board data shows. Shipments fell 2.1 percent to 1.06 million tons in the first 25 days of May from the same period in April, surveyor Societe Generale de Surveillance said May 27. That compares with an 18 percent decline in the first 10 days.
“Because of soybeans’ high price, palm oil continues to be an attractive alternative for a lot of the countries” which observe Ramadan, Ng said. Palm oil and soybean oil are substitutes in food and fuel uses.
Soybeans for July delivery climbed 0.4 percent to $15.1575 a bushel on the Chicago Board of Trade today, extending a 2.2 percent surge yesterday, and soybean oil for the same month rose 0.3 percent to 49.69 cents a pound.
Refined palm oil for September delivery gained 0.9 percent to 6,222 yuan ($1,015) a ton on the Dalian Commodity Exchange, while soybean oil advanced 1.1 percent to 7,578 yuan.
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Source : Bloomberg