Palm oil hits highest in almost 1-1/2 yrs on dry weather fears

March 3rd, 2014

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Category: Oilseeds

(Reuters) – Malaysian palm oil futures rose to their highest in nearly one-and-a-half years on Monday, boosted by climbs in comparative vegetable oils and by expectations that dry weather will dent output in dominant Southeast Asian producers.

The U.S. soyoil contract for May added 1.1 percent in late Asian trade, while the most active May soybean oil contract on the Dalian Commodities Exchange gained 1.6 percent.

The benchmark May contract on the Bursa Malaysia Derivatives Exchange ended 0.2 percent higher at 2,806 ringgit ($860) per tonne. Prices earlier hit 2,860 ringgit, their highest since Sept. 20, 2012.

“The first thing is the weather,” a trader with a foreign commodities brokerage said. “It is a weather play… in both Indonesia and Malaysia.

“At the same time, we all saw what happened to soybean oils on Friday and Dalian followed.”

Concerns over dry weather tightening palm supplies have boosted palm prices in recent sessions, but bumper global oilseed supplies could dent the recent rally, analysts and traders said on the sidelines of an industry conference in Kuala Lumpur on Monday.

Market participants will be watching for price outlooks from key speakers at the conference that runs from March 3-5.

Technicals were bullish. Malaysian palm oil is expected to rise to 2,883 ringgit per tonne, as indicated by a Fibonacci retracement analysis, said Reuters market analyst Wang Tao.

Total traded volume on Monday morning stood at 32,108 lots of 25 tonnes, slightly lower than the average 35,000 lots.

India, the world’s biggest importer of vegetable oils, will boost imports of soybean oil at the cost of palm in the year to October 2014 as the spread between the two competing products has narrowed, traders said.

In other markets, crude oil prices jumped more than $2 a barrel to multi-month highs, lifted by rising tension in Ukraine after Russian President Vladimir Putin declared he had the right to invade his neighbour.

Higher crude oil prices would increase demand for palm oil as an alternative feedstock to produce biofuels.

In related news, Indonesia’s palm oil exports fell 26 percent in January compared with the previous year, the statistics bureau said, due to higher biofuel demand.

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