Malaysian palm oil price at 2-week high, tracks strength in crude oil
The Star Online (04/10/2018) - SINGAPORE: Malaysian palm oil futures gained 1.8 percent on Wednesday with the market hitting its highest in more than two weeks, underpinned by rising crude oil prices.
Strength in rival soybean oil provided additional support to the tropical oil but gains were capped by higher palm oil reserves in Malaysia, the world's second largest producer.
The benchmark palm oil contract for December delivery on the Bursa Malaysia Derivatives Exchange closed up 38 ringgit, or 1.8 percent, at 2,198 ringgit ($531.30) a tonne, after rising to its highest since Sept. 18 at 2,209 ringgit a tonne earlier in the session.
Trading volumes stood at 44,514 lots of 25 tonnes each by the end of the session.
"Gains in crude oil prices are supporting palm oil because the higher crude oil goes there will be more use of palm oil in making biodiesel," said a Kuala Lumpur-based trader.
"Had it not been for the strength in crude oil, palm oil would have dropped below 2,000 ringgit a tonne because the stocks are high."
Oil traded above $85 a barrel and near a four-year high on Wednesday, supported by expectations that U.S. sanctions on Iran will tighten supply and strain the ability of Saudi Arabia and other producers to pump more.
Soybean oil climbed to its highest since late June as unseasonal rains slowed the soybean harvest in parts of the U.S. Midwest.
Palm oil stockpiles are expected to keep a lid on the market.
Malaysian palm oil inventories rose to a seven-month high of 2.49 million tonnes in August, official data from a Malaysian industry regulator showed.
Industry analyst Dorab Mistry also pegged Malaysia's peak end-stocks at 3-3.3 million tonnes for the year, while estimating that Indonesia's inventories are currently close to 5 million tonnes and will keep rising.
The Dalian January soybean oil contract and January palm oil contract were untraded as the Dalian Commodity Exchange was closed for national holidays in China. - Reuters