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Palm Oil Headed for Second Weekly Gain on Demand, Weather Threat to Output
Palm oil was headed for the second straight weekly gain on speculation demand may increase among Asian nations and as weather threatens to disrupt output in the biggest producers of the tropical commodity.
October-delivery futures climbed as much as 0.6 percent to 2,535 ringgit ($784) metric a ton on the Malaysia Derivatives Exchange, the highest price since May 10. The most-active contract traded at 2,522 ringgit at 4:15 p.m. in Kuala Lumpur. Prices jumped 2.5 percent yesterday, the most in more than three months, taking the week’s gain to 2 percent.
“Demand has been good all through this year and that continues because of pre-stocking for Ramadan festival,” said Arhnue Tan, an analyst with ECM Libra Capital Sdn. “Malaysian palm oil stockpiles are down at a time when there’s speculation La Nina may affect production later this year.”
China, India, Pakistan and Indonesia mark their important festivals in the quarter ending September, with communal meals stoking edible oils consumption. Malaysia’s exports increased 5.5 percent to 1.44 million tons in June, beating estimates by cargo surveyors Intertek and Societe Generale de Surveillance.
Greater-than-expected exports of palm oil from in Malaysia, the second-largest producer, pared June stockpiles to a 10-month low of 1.45 million tons, the country’s Palm Oil Board said on June 12. Exports rose 5.5 percent to 1.44 million tons.
Goldman Sachs Group Inc. this week forecast crude palm oil for immediate delivery would gain 15 percent to 20 percent this year after dry weather hurt Malaysian production.
‘Weather Concerns’
“The weather concerns persist not just in palm oil producing countries, even the U.S. weather for soybean is reportedly not great,” ECM Libra’s Tan said. “If there’s flooding in Southeast Asia that hurts palm oil output, one could expect dry weather in the U.S.” because of the La Nina weather event, she said.
Palm oil may trade between 2,200 ringgit and 2,600 ringgit a ton until October, she said. Palm and soybean oils are direct substitutes.
Argentina yesterday levied anti-dumping duties on some Chinese products a week after the presidents of the two countries failed to end an embargo by the Asian nation on Argentine soybean oil imports.
China in April banned Argentine soybean oil imports in retaliation for anti-dumping probes on products ranging from elevators to textiles. Argentina is the largest exporter of soybean oil. Until the start of the embargo, the South American nation supplied about 75 percent of imports by China, the world’s biggest consumer of the edible oil.
Soybeans Rally
Soybeans advanced for the fourth straight day in Chicago after a drought in Europe cut output of canola and sunflowers, increasing global demand for oilseeds from the U.S. November- delivery futures gained 0.4 percent to $9.83 a bushel at 4:09 a.m. Singapore time. The oilseed, up 9 percent this month, began the rally after the U.S. government said reserves as of June 1 were at a six-year low.
Soybean oil for delivery in December rose 0.1 percent to 39.59 cents, extending a 1.7 percent advance yesterday. Soybean oil’s premium over palm oil narrowed to $88.32 a ton from $90.21 yesterday, according to Bloomberg data.
CME Group Inc.’s October-delivery palm oil contract, which is pegged to the Malaysian benchmark price, surged 2.8 percent to $780.75 a ton yesterday.
On the Dalian Commodity Exchange, January-delivery palm oil Added 0.5 percent to 6,628 yuan ($978) a ton, while soybean oil advanced 0.5 percent to 7,624 yuan a ton.
To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net
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