Palm oil hits two-year top, spurred by output worries
[KUALA LUMPUR] Malaysian palm oil futures surged to a two-year high on Monday, rising for a sixth session out of eight, on persistent worries that a crop-damaging El Nino weather event would curb yields.
Palm oil experts had forecast at a Kuala Lumpur industry conference earlier in March that benchmark prices could soar to as much as RM3,000 a tonne by mid-year, up around 10 per cent from current levels, due to El Nino.
"The market is technically still speculative. It's still reacting to bullish news, as was spoken at the conference," said a trader from a brokerage firm in Kuala Lumpur.
"Price levels of RM3,000 is coming, but you also have to look at the overall scenario of the market, including demand." The palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange rose 1.3 per cent to reach RM2,758 (US$688) per tonne at the close of trade. It earlier hit RM2,764 in the afternoon, the strongest since March 21, 2014.
Traded volumes were 39,600 lots of 25 tonnes each, versus a 2015 daily average of 44,600 lots.
Leading vegetable oils analyst Dorab Mistry estimated on Monday that annual palm output from Malaysia, the world's second largest grower after Indonesia, will fall by 2 million tonnes in the oil year ending September 2016.
Mistry maintained his estimate for Indonesian palm production to fall by 1.2 million tonnes.
Technical charts show palm oil could rise to RM2,776 over the next 24 hours as it has cleared a resistance at RM2,729, said Wang Tao, a Reuters market analyst for commodities and energy technicals.
In competing vegetable oil markets, the September soybean oil contract on the Dalian Commodity Exchange gained 0.5 per cent, and the May Chicago Board of Trade soyoil contract rose 1.4 per cent.
Crude palm kernel oil's offer price rose to a five year high of RM5,423.35 per tonne on Monday evening on supply concerns, according to price assessments by Thomson Reuters, as traders anticipate tighter supplies of the oil moving forward.
REUTERS
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