Palm oil to see fifth-week gain due to concerns over production

Malaysian palm futures were up on Friday, and on course for their fifth consecutive weekly gain. This would be the longest winning streak in three years. The market was supported by expectations of a weaker production.

By midday, the benchmark contract for palm oil delivery in May on the Bursa Derivatives exchange had gained 58 Ringgit or 1.25% to 4,700 Ringgit ($1,063.83) per metric ton.

This week, the contract has increased by 2.47%.

David Ng is a proprietary trader with Kuala Lumpur's trading firm Iceberg X Sdn Bhd. He said that the market was trading higher because of expectations for a lower output in Malaysia. This could lead to a reduction in overall stock levels.

Dalian's palm oil contract, which is the most active contract, increased by 1.44%. Chicago Board of Trade soyoil prices were down 0.5%.

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

The oil price continued to rise, heading for a week-long increase. Falling inventories of U.S. distillate and gasoline raised expectations of a solid demand, while worries about supply disruptions in Russia provided support.

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

Exports of palm oil products from Malaysia between February 1-20 were estimated to have fallen between 0.3% and 8% compared to the same period one month earlier.

Four trade sources reported that Indian refiners cancelled orders for 70,000 tons of crude oil due to be delivered between March and June, citing a rise in Malaysian benchmark prices and a decline in refining margins.

Technical analyst Wang Tao stated that palm oil could break through resistance at 4,714 Ringgit per ton, and then rise to a range between 4,755 ringgit and 4,780 ringgit.

(source: Reuters)