BLBG:Palm Oil Gains on Speculation Lower Production May Cut Reserves
Palm oil snapped a four-day losing streak on speculation that falling output in Malaysia may help cut record inventories and as investors reversed bets on further declines from a two-week low.
The contract for March delivery climbed as much as 0.7 percent to 2,407 ringgit ($791) a metric ton on the Malaysia Derivatives Exchange and ended the morning session at 2,402 ringgit. Futures dropped 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 southeast Asian production 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. Official data on holdings in December are scheduled 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.
Palm oil for May lost 0.2 percent to 6,832 yuan ($1,098) a ton on the Dalian Commodity Exchange. Soybean oil for May fell 0.7 percent to 8,604 yuan a ton.
Soybeans for March delivery gained 0.2 percent to $13.895 a bushel on the Chicago Board of Trade. Soybean oil for delivery in March advanced 0.3 percent to 49.70 cents a pound.
To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
