KUALA LUMPUR: Malaysian palm oil futures reversed early losses on Monday, after prices hit an 11-day low, buoyed by stronger crude futures and expectations of tight supply as traders await key data.
The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange gained 65 ringgit, or 1.6%, to 4,117 ringgit ($941.46) a tonne, snapping a three-session decline.
A stronger ringgit and poor exports, with growing doubts about China’s demand as COVID-19 infections soar, had earlier put pressure on the market, said Mitesh Saiya, trading manager at Mumbai-based trading firm Kantilal Laxmichand & Co.
The ringgit, palm’s currency of trade, rose 0.64% against the dollar, making the commodity more expensive for holders of foreign currency.
Palm oil posts weekly losses as optimism over lower stocks wanes
The Malaysian Palm Oil Board is scheduled to release December supply and demand data on Tuesday.
A Reuters’ poll pegged at-December inventories shrinking to a four-month low, but still at a fairly high level of 2.17 million tonnes.
Palm supplies will likely remain tight, as reflected in a survey by a millers’ association, showing production down by 15.25% during the first five days of January versus the same period last month, Refinitiv Agriculture Research said in a note.
“On the external front, Indonesia is expected to increase its palm oil consumption to support its mandatory 35% palm oil biodiesel blending programme from Feb. 1,” Refinitiv said.
Oil prices climbed more than 2% as China’s move to reopen its borders boosted the demand outlook and overshadowed global recession concerns, making palm a more attractive option for biodiesel feedstock.
Dalian’s most-active soyoil contract fell 0.8%, while its palm oil contract eased 1.2%. Soyoil prices on the Chicago Board of Trade were up 1.8%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.