Palm prices rise on fear of lower production, but demand is weak.

Malaysian palm futures rose Thursday, supported by lower production levels. However, persistent concerns about demand from key import countries limited gains.

By midday, the benchmark May palm oil contract on Bursa Derivatives Exchange had gained 46 ringgit or 1.03% to 4,533 Ringgit ($1,023.71) per metric ton. The contract fell 2.98% over the last three sessions.

The palm oil market is resilient despite the recent sell-offs due to uncertainty in global markets over tariffs. Production has not increased even since March while demand remains a concern," stated Paramalingam Supramaniam of Selangor brokerage Pelindung Bestari.

"Even if the production picks up in the second part of the year, there won't be any big jump. It will likely be gradual." The Malaysian Meteorological Department also issued an advisory next week that heavy rains are expected, which could continue to disrupt production.

Dalian's palm oil contract, which is the most active contract, rose by 0.64%. Chicago Board of Trade Soyoil Prices fell by 0.19%.

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

After a spike on Wednesday, oil prices fell on Thursday as the markets weighed macroeconomic worries against a strong near-term demand.

Palm oil is less appealing as a biodiesel feedstock due to the weaker crude oil futures.

The palm ringgit's trade currency, the dollar, fell by 0.05%, lowering the price of the commodity for buyers who hold foreign currencies.

Technical analyst Wang Tao stated that a retracement chart and a rising trendline indicate that palm oil will retrace towards 4,360 ringgit a ton. ($1 = 4.4280 ringgit)

(source: Reuters)