business
Palm oil jumps as dry weather seen slashing global output
Palm oil prices are expected to recover to trade around RM2,700-RM3,000 a tonne by June. – The Malaysian Insider file pic, March 9, 2016.Malaysian palm oil futures surged on Wednesday as leading industry analysts raised concerns over production due to dry weather in key producing countries and forecast a rally in prices in coming months.
The palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange ended up 1.15% at RM2,558 per tonne. The contract earlier rose to RM2,563, the highest since February 29.
El Nino weather is likely to hit palm plantations in top producing Indonesia and Malaysia and reduce global supplies in 2016, leading edible oil analysts told an industry conference in in Kuala Lumpur on Wednesday.
"Analysts' comment over the production shortfall triggered buying," said a Kuala Lumpur-based trader.
Malaysian palm oil futures will climb nearly 20% to around RM3,000 a tonne as dry conditions brought by the El Nino weather pattern curb output in major producers, said top industry analyst Dorab Mistry.
James Fry, chairman of commodities consultancy LMC International, said global palm oil production could fall by over two million tonnes this year.
Palm oil prices are expected to recover to trade around RM2,700-RM3,000 a tonne by June, Thomas Mielke, editor of Hamburg-based newsletter Oil World said.
Traded volume stood at 25,720 lots of 25 tonnes each, higher than the 20,334 lots traded on Tuesday.
The recovery in crude oil prices and a weak ringgit also underpinned palm oil, said another dealer based in Kuala Lumpur.
The Malaysian currency lost 0.27% versus the dollar, making the tropical oil, which is priced in the ringgit, cheaper for holders of other currencies.
Oil prices rose above US$40 (RM164.50) a barrel on Wednesday, driven by anticipation that the world's largest exporters could agree this month to freeze production and help erode the largest global build in unwanted crude in years.
In competing vegetable oil markets, the May soybean oil contract on the Dalian Commodity Exchange fell 0.21%, while the Chicago soyoil contract rose 0.67%. – Reuters, March 9, 2016.
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