Key Takeaways
- Malaysian palm oil futures increased for the second straight session.
- Rise follows gains in crude oil prices and expectations of tight supply.
- Technical analyst predicts further gains in the near future.
Malaysian palm oil futures rose for a second consecutive session, reaching 4,896 ringgit ($1,200.59) a metric ton by midday on Tuesday, according to the Bursa Malaysia Derivatives Exchange.
The increase was driven by rising crude oil prices, which made palm oil a more attractive option for biodiesel feedstock, as noted by Anilkumar Bagani, research head at the Mumbai-based vegetable oil broker Sunvin Group.
Additional support for palm oil prices came from expectations of tight supply next year due to Indonesia’s B50 biodiesel mandate and potential production reductions due to El Niño, as Bagani explained.
Crude oil prices climbed on Tuesday amid concerns over supply disruptions, following attacks on Saudi Arabian energy infrastructure that left the kingdom’s East-West pipeline offline.
While Dalian’s soyoil contract dropped 0.91%, its palm oil contract fell 0.38%, and soyoil prices on the Chicago Board of Trade were slightly up 0.07%, palm oil continued to track rival edible oils in the global market.
The ringgit, the currency of trade for palm oil, weakened 0.1% against the dollar, making the commodity cheaper for buyers holding foreign currencies.
Technical analyst Wang Tao of Reuters predicted that palm oil may further bounce into the 4,930 to 4,964 ringgit per metric ton range after breaking above a falling trendline.
Bagani added that stronger crude oil futures make palm a more attractive option for biodiesel feedstock, contributing to the rise in palm oil prices.
BMD CPO futures were seen trading higher today following gains in energy prices.
Anilkumar Bagani, Research head at the Mumbai-based vegetable oil broker Sunvin Group
Palm oil may bounce further into the 4,930 ringgit to 4,964 ringgit per metric ton range, after breaking above a falling trendline.
Wang Tao, Technical analyst at Reuters
