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Palm Oil Climbs on Speculation Lower Output Set to Cut Reserves

Jan. 9 (Bloomberg) -- Palm oil snapped a four-day losing streak on speculation that declining output may cut record inventories in Malaysia, the biggest producer after Indonesia.

The contract for March delivery advanced 1 percent to close at 2,413 ringgit ($793) a metric ton on the Malaysia Derivatives Exchange. Futures fell 4.4 percent in the four days through yesterday to close at the lowest price since Dec. 20.

Palm oil, which constitutes 29 percent of world oil and fats consumption, has “upward potential” from now to April as production in Southeast Asia declines seasonally and heavy rain in Malaysia threaten to delay harvesting, Oil World said in a report yesterday. Futures, which slid to a three-year low last month, have probably bottomed, as stockpiles are reduced, the Hamburg-based researcher said.

“Production is in a declining period at the moment,” said Donny Khor, associate director for futures and options at OSK Investment Bank Bhd. in Kuala Lumpur. “But there is uncertainty over demand and a lack of clear direction” ahead of key industry data tomorrow, he said.

Stockpiles in Malaysia were 2.53 million tons in December compared to the record 2.56 million tons a month earlier, according to the median of estimates from six analysts and two plantation companies in a Bloomberg survey published this week. The Malaysian Palm Oil Board is scheduled to release the monthly data tomorrow.

Traders may be reversing bets on further declines and futures may trade between 2,350 ringgit and 2,500 ringgit in the near term, said Khor. Prices tumbled 23 percent last year and reached a three-year low of 2,217 ringgit on Dec. 13.

Palm oil for May declined 0.6 percent to close at 6,804 yuan ($1,093) a ton on the Dalian Commodity Exchange. Soybean oil for May fell 0.7 percent to end at 8,600 yuan a ton.

Soybeans for March delivery lost 0.3 percent to $13.83 a bushel on the Chicago Board of Trade. Soybean oil for delivery in March gained 0.2 percent to 49.64 cents a pound.

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at

To contact the editor responsible for this story: James Poole at

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