JAKARTA: Malaysian palm oil futures rose to their highest level in eight months on Wednesday, supported by technical trading and expectations that wet weather may hit production in dominant Southeast Asian producers in the coming months.
By the mid-day break, the benchmark January contract on the Bursa Malaysia Derivatives Exchange was trading up 2.1 per cent at RM2,551 per tonne.
"The market is pretty strong," said one trader with a foreign commodities brokerage. "We are going into the monsoon season and Malaysian production is likely to go down."
Both Malaysia and Indonesia, which account for about 90 per cent of the world’s palm oil production, are now entering their monsoon weather season.
Benchmark prices earlier touched RM2,555 per tonne, their highest since February 22. Total traded volume stood at 15,741 lots of 25 tonnes each, above the usual 12,500 lots.
Technicals showed Malaysian palm oil has a good chance of rising towards RM2,630, once it had broken above a resistance at RM2,544 per tonne, said Reuters market analyst Wang Tao.
"I can’t put a finger on it — probably a technical move today," said a second trader with foreign commodities brokerage. "I don’t see any big changes to the fundamentals."
Competing vegetable oil markets also rose, traders said, with the US soyoil contract for December up 1.9 per cent in early trade. The most-active May soybean oil contract on the Dalian Commodities Exchange rose 2.6 per cent.
In other markets, Brent crude edged down below US$109 as fears waned about the extent of disruptions to petroleum exports from OPEC member Libya, while a higher-than-expected weekly stock build weighed on market sentiment for US oil futures.
Palm traders were also positioning themselves ahead of data due on Thursday. Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance will release Malaysia’s October palm oil export data on October 31.
"Production is much lower than expected," said a Jakarta-based palm trader. "The bumper crop has not happened.
"Some people still hope that production will increase from December to January, but most are losing confidence on this now happening."-- Reuters