Palm oil firms as floods spark production concerns

January 4, 2021: Malaysian palm oil futures extended gains for the third straight session on Tuesday, hovering near a more than three-week high, as worsening floods added to worries over a larger-than-expected decline in production.

The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange gained 5 ringgit, or 0.1%, to 4,862 ringgit ($1,163.16) a tonne during early trade.

It fell 0.66% during overnight trade, after starting the year up 3.4%.

FUNDAMENTALS

* Supplies remain tight due to wet weather in Peninsular Malaysia and Sabah amid the Northeast monsoon season that has led to widespread flooding, with industry data estimating output 8.5% lower for December versus November, according to Refinitiv Commodities Research.

* Persistently high palm oil prices and renewed lockdowns to combat the Omicron coronavirus variant have hurt demand, Refinitiv said.

* Exports of Malaysian palm oil products for December fell 5.3% from November, cargo surveyor Intertek Testing Services said on Friday.

* Dalian's most-active soyoil contract gained 0.8%, while its palm oil contract rose 1.8%. Soyoil prices on the Chicago Board of Trade were up 0.4%.

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

* Palm oil may retest a resistance at 4,873 ringgit per tonne, a break above which could lead to a gain to 4,948 ringgit, Reuters technical analyst Wang Tao said.

Reuters