business
Palm oil jumps as dry weather seen slashing output
Global palm oil production is expected to drop due to dry weather from the El Nino weather pattern. – Reuters pic, March 9, 2016.Malaysian palm oil futures surged on Wednesday on concerns over production due to dry weather in key producing countries and as a leading industry analyst forecast a rally in prices.
The palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange was up 0.91% at RM2,551 (US$617.68) per tonne by midday.
Global palm oil production is expected to decline by 200,000 tonnes in 2015/16 due to dry weather from the El Nino weather pattern, leading edible oil industry analyst Thomas Mielke said on Wednesday.
Mielke said palm oil prices could trade in a range of RM2,700 to RM3,000 per tonne due to the production shortfall.
"Mielke's view on the production shortfall prompted some buyers to take long positions after staying on sideline in last few days," said a Kuala Lumpur-based trader.
Dry weather has been affecting palm oil production in top producers Indonesia and Malaysia.
The upside in crude oil prices and a weak ringgit also underpinned palm oil, said another dealer based in Kuala Lumpur.
The Malaysian currency lost 0.5% versus the dollar, making the tropical oil, which is priced in the ringgit, cheaper for holders of other currencies.
Traded volume stood at 8,441 lots of 25 tonnes each, significantly below the roughly 13,500 lots usually traded by midday.
Oil prices were only slightly higher on Wednesday as support from falling US production was countered by a strengthening US dollar and concerns over slowing demand.
Palm oil may break a resistance at RM2,545 per tonne and then rise to the next resistance at RM2,555, said Wang Tao, Reuters market analyst for commodities and energy technicals.
In competing vegetable oil markets, the May soybean oil contract on the Dalian Commodity Exchange fell 0.84%, while the Chicago soyoil contract nudged down 0.1%. – Reuters, March 9, 2016.
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