Malaysian Palm Oil Ticks Up From 1-week Low on Concern Over Flood Losses

SINGAPORE: Malaysian palm oil edged higher on Friday, regaining ground after dropping to a one-week low earlier in the session as concern over flooding in Malaysia underpinned the market, although gains were capped by technical factors. The benchmark March contract finished up 0.8 percent at 2,284 ringgit ($650) per tonne after falling earlier to 2,245 ringgit, its lowest since Dec. 26. Traded volume stood at 35,311 lots of 25 tonnes each, in line with the daily average of 35,000 lots. Malaysia is the world’s second-largest producer of palm oil. Monsoon flooding reduced production in December by around 20 percent from November and further impact is likely to be felt in the first quarter of this year. “We estimate that the floods over the past two weeks, hitting the east coast states of Malaysia hardest, may have led to an additional nine percent, or 157,000 tonnes, of drop in crude palm oil output in December 2014,” CIMB wrote in a note to clients on Friday. It said this decline was in addition to an 11 percent fall in production expected before the floods. Technical signals were bearish. Palm oil may retrace more to 2,230 ringgit per tonne as it has broken support at 2,260 ringgit, according to Reuters market analyst Wang Tao. That support represented a 23.6 percent Fibonacci retracement on the rise from the Dec. 17 low of 2,103 ringgit to the Dec. 29 high of 2,308 ringgit. RHB Research saw little scope for prices to rise far. “We expect the current flood hitting West Malaysia to have a very short-term impact on palm oil production,” it said in a research note. “Upside is limited by falling energy prices.” The flooding could result in palm oil output declining by around 15 percent to 30 percent in December, Douglas Uggah Embas, the country’s commodities minister, said on Wednesday. Heavy rain in recent weeks has forced close to a quarter of a million people from their homes and had claimed 21 lives as of Tuesday, local authorities said. The palm price recorded a 14.8 percent drop last year, its biggest decline since 2012, but losses were less steep than initially expected because of the flooding. ($1 = 3.515 ringgit)- Reuetrs


Source : The Star


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