Malaysian palm oil recovered losses to close up on Thursday and dealers said they expected the market to end the year above 1,400 ringgit in anticipation of a drawdown in stocks.
Both palm oil physicals and futures have been hovering above the psychologically important 1,400 ringgit mark for a week after floods in Malaysia's northern and eastern regions raised concerns about output from plantations.
December is traditionally a period of lower production for palm oil, but last week's flooding could cut monthly volume by as much as 15 percent, compared with an initial forecast of 10 percent, said dealers.
Stocks of crude palm oil reached a record 1.6 million tonne at end-November as demand cooled after the end of major festivals in Asia. "If December's production falls by anything more than 10 percent and exports do as well or better than last month, then we're looking at a drop of up to half a million tonnes in stocks," said a dealer.
"That's what's keeping this market above 1,400 ringgit."
Society General de Surveillance, a palm oil cargo tracker closely watched by the industry, said on Tuesday that Malaysian exports of oil palm products for December 1-25 were down just 1.6 percent from the same period of November.
The benchmark third-month futures contract, March, ended up 4 ringgit at 1,415 ringgit ($374.39) a tonne after trading between 1,407 and 1,418.
Other traded months were up 3 to 4 ringgit. Volume was light, with many players away on year-end holidays. A total of 2,281 lots of 25 tonnes each were traded by the close, compared with the 6,000 lots or more seen on busier days. The trend in US soyaoil was the opposite, with both spot and forward months showing sharp losses for a second straight day.
March soyaoil on the Chicago Board of Trade closed down 0.06 on Wednesday and fell a further 0.16-cent on Thursday's electronic session, conducted during Asian business hours.
In the physical market for crude palm oil, offers/bids for January stood at 1,410/1,405 ringgit a tonne, unchanged from Wednesday's close. Trades were reported at 1,405 ringgit.
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