Palm gains due to low inventories and expectations of low output

The price of Malaysian palm oil futures increased on Tuesday due to expectations that palm production will be reduced and inventories will decrease.

At midday, the benchmark palm oil contract on Bursa Derivatives Exchange for January delivery gained 20 ringgit or 0.44% to 4,549 Ringgit ($1,041.44) per metric ton.

David Ng is a proprietary trader with Kuala Lumpur's Iceberg X Sdn. Bhd. He said that the palm oil futures are higher because of expectations for weaker output and lower stocks in the country. This demand is also supported by a strong market.

Dalian's palm oil contract, which is the most active contract, fell by 0.09%. Chicago Board of Trade soyoil prices were up by 0.28%.

As palm oil competes to gain a share in the global vegetable oil market, it tracks the prices of competing edible oils.

Oil prices rose after a sharp drop on Monday. A U.S. plan for purchasing oil for the Strategic Petroleum Reserve gave support to the price, and investors continued to focus on the developments in the Middle East.

Palm oil is a better option as a biodiesel feedstock because crude oil futures are stronger.

The palm ringgit's trade currency, the U.S. Dollar, fell by 0.23%, making the commodity more affordable for buyers who hold foreign currencies.

(source: Reuters)