Malaysian palm oil futures edged lower on Tuesday, but hovered near the previous session’s one-week high on concerns that thunderstorms in several palm growing areas in the world’s No.2 producer could disrupt supply.
Thunderstorms and heavy rains accompanied by strong winds are expected over most parts of Malaysia in the coming week, the country’s meteorological department website showed on Tuesday, including in the major palm oil producing states of Sabah, Johor and Pahang.
"Malaysian local weather is supportive for the palm oil market because it makes production more difficult," said a trader with a foreign commodities brokerage in Kuala Lumpur.
"But prices are still trading in a range. Today’s range is seen between RM2,450-RM2,480," the trader added.
By the mid-day break, the benchmark January contract on the Bursa Malaysia Derivatives Exchange had edged down 0.2 per cent to RM2,458 per tonne, but stayed near Monday’s one-week high of RM2,483. Prices traded in a tight range between RM2,454-RM2,477.
Total traded volume stood at 20,701 lots of 25 tonnes each, nearly double the usual 12,500 lots.
Technicals showed Malaysian palm oil still faces a resistance at RM2,486 and may hover below this level for one trading session, said Reuters market analyst Wang Tao.
The meteorological department also showed that the monsoon season this year is expected to start in the second week of November and subside from January onwards. Heavy rains could cause floods in some areas, it warned.
Floods would disrupt palm oil harvesting and complicate transportation of fresh fruit bunches to mills, leading to tighter supplies of the tropical oil.
Lower production could offset sluggish export demand normally seen at the end of the year and help prevent palm stocks from surging.
In other markets, Brent crude futures edged lower toward US$109 a barrel on Tuesday ahead of the Federal Reserve’s policy-setting meeting, but held within sight of a near one-week high as a sharp drop in Libyan oil exports rekindled worries over supply.
In competing vegetable oil markets, the US soyoil contract for December rose 0.3 per cent in early Asian trade. The most-active May soybean oil contract on the Dalian Commodities Exchange dropped 0.9 per cent.-- Reuters