Malaysian palm oil futures rose on Friday for a third successive session to the highest in 2-1/2 weeks, tracking gains in other vegetable oils and supported by expectations of lower output. Palm traders say the onset of the monsoon season in key Southeast Asian producing countries could crimp supplies and help boost prices. Palm also found support as soybean oil prices in China climbed slightly.
“Dalian has been inching up for the past few days,” said one Kuala Lumpur-based trader, adding that strong Chinese demand was also expected in the coming weeks. “At the same time we are moving into the monsoon season and production will drop sharply.” The February benchmark palm oil contract on the Bursa Malaysia Derivatives Exchange ended 0.9 percent higher at 2,361 ringgit ($555) per tonne. The contract fell to a near one-month low earlier this week at 2,260 ringgit per tonne, but has since rebounded to its highest since November 9 at 2,374 ringgit. Prices have added 3.1 percent this week but are little changed for the month so far.
The January soybean oil contract on the Dalian Commodity Exchange was up 0.5 percent. Traded volumes for benchmark palm stood at 27,065 lots of 25 tonnes each, below the 35,000 average lots usually traded by the end of the session. Many palm investors are attending the annual Indonesian Palm Oil Conference and 2016 Price Outlook at the resort island of Bali this week, where analysts offered hints on market and price direction on Friday.
Bulging stockpiles, weak prices, the impact of the El Nino dry weather pattern and new biodiesel mandates are among the topics discussed by delegates. Palm prices will average 2,450-2,550 ringgit a tonne next year, Fadhil Hasan, executive director at the Indonesian Palm Oil Association, told the conference. “Factors determining prices in 2016 are the implementation of Indonesia’s biodiesel program, price of crude oil, El Nino and implementation of CPOPC (Council of Palm Oil Producer Countries).”
Palm oil may revisit its November 9 high of 2,384 ringgit, as it has risen above resistance at 2,348 ringgit per tonne, said Wang Tao, a Reuters market analyst for commodities and energy technicals. The ringgit eased against the dollar but touched its strongest level since October 19 earlier this week. A stronger ringgit normally curbs demand for palm, as it makes the edible oil costlier for holders of foreign currencies. In related markets, crude oil futures fell on Friday with losses this month standing at around 9 percent, hurt by disappointing Chinese economic data and worries over a supply glut.