Palm Oil Gains to Two-Month High as Rains May Disrupt Supplies

Palm oil advanced to the highest level in two months on speculation that rainfall and flooding may hamper harvesting in Malaysia, helping to draw down record stockpiles in the second-largest producer.

The contract for March delivery jumped 2.6 percent to 2,501 ringgit ($824) a metric ton on the Malaysia Derivatives Exchange, the highest settlement price for the most-active contract since Nov. 1. Futures lost 23 percent last year as inventories in Malaysia expanded.

A so-called heavy-rain warning was issued on Dec. 31 for several districts in Terengganu and Pahang, according to a statement from the Malaysian Meteorological Department. The rain was expected to persist until today and cause floods, the department said. The two states accounted for about 18 percent of the country’s total crude palm oil output from January to November last year, according to the Malaysian Palm Oil Board.

“That’s going to cause a disruption in the supply and also a disruption in the harvesting progress,” Ker Chung Yang, an analyst at Phillip Futures Pte, said from Singapore. “We are likely to see the stockpiles subside.”

Commodities from oil to copper rallied today after the U.S. Congress passed a bill that averted spending cuts and tax gains threatening a recovery in the world’s biggest economy.

Palm oil inventories in November reached 2.56 million tons, according to the palm oil board, which is scheduled to release data for December on Jan. 10.

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net

To contact the editor responsible for this story: Jake Lloyd-Smith at jlloydsmith@bloomberg.net

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