09.04.2020 (Business Recorder) - Malaysian palm oil futures ended higher on Wednesday as supply disruption worries arose after Malaysia upheld its decision to temporarily close plantations and mills to contain the spread of the coronavirus.

The benchmark palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange closed up 48 ringgit, or 2.07%, to 2,363 ringgit ($543.84) per tonne, its third daily gain.

Malaysia's biggest palm oil-producing state, Sabah, said on Wednesday palm operations in six districts will remain closed until it is sure that plantations and mills are safe to reopen amid the coronavirus outbreak.

The market was trading higher in the morning session on speculative bets over an extended supply disruption in Malaysia, said Marcello Cultrera, institutional sales manager at Phillip Futures in Kuala Lumpur.

The world's second-largest palm oil producer risks losing 500,000 tonnes of crop from a 14-day blanket closure of plantations and mills in six districts aimed at stemming the spread of the coronavirus, the Malaysian Palm Oil Association warned on Tuesday.

“Participation in the market is still subdued, current prices do not really match fundamentals with higher than expected supply estimates and some slow re-stocking from China," Cultrera said.

The Malaysian Palm Oil Association had estimated March crude palm oil production to increase 11% to 1.43 million tonnes, traders said.

Crude oil climbed on Wednesday, reversing most of the prior session's losses, as investors pinned hopes on a Thursday meeting where major producers will discuss output cuts to shore up prices. Stronger crude oil futures make palm a more attractive option for biodiesel feedstock.

Dalian's most-active soyaoil contract gained 1.28%, while its palm oil contract jumped 2.37%. Soyaoil prices on the Chicago Board of Trade were trading down 0.29%.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

Copyright Reuters, 2020

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