Palm oil prices set for third weekly gain as weaker ringgit spurs buying

[KUALA LUMPUR] Malaysian palm oil futures rose 2 per cent on Friday, set for a third consecutive weekly gain, as a weaker ringgit made edible oil cheaper for holders of foreign currency, while expectations of tight production further buoyed trader sentiment.

The ringgit, palm's currency of trade, weakened 0.12 per cent against the dollar.

The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange gained RM90, or 2.39 per cent, to RM3,859 (S$1,248.61) a tonne by the midday break.

Palm has risen 1.8 per cent so far this week, heading for its longest weekly gaining streak since early January.

The ringgit plunged to a near one-year low and stoked bargain-buying, Sathia Varqa, co-founder of Singapore-based Palm Oil Analytics said, adding that higher palm and soybean oil prices on the Dalian provided further support.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

The currency weakened after Malaysia's key ally in the ruling coalition withdrew support for Prime Minister Muhyiddin Yassin late on Wednesday and called on him to resign at a time when the country remains in a Covid-19 lockdown.

"The current situation will depend on how quickly the domestic political situation is resolved, but so far there are no clear outcomes to be expected, which may depreciate the ringgit further and dent investor sentiment," Dr Varqa added.

Labour shortage continues to hurt production in Malaysia.

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The Malaysian Palm Oil Association this week estimated June production to rise 1.6 per cent from the month before, much slower than a Reuters' survey pegging a 7.5 per cent rise, according to traders.

The Malaysian Palm Oil Board is scheduled to release June supply-and-demand data on Monday.

Dalian's most-active soyoil contract gained 1.4 per cent, while its palm oil contract rose 2.2 per cent. Soyoil prices on the Chicago Board of Trade were up 1 per cent.

REUTERS