Malaysian palm oil futures jumped on Wednesday to their highest in two-and-a-half months, bolstered by a weak ringgit and on worries over potential dry weather curbing crop output. The benchmark December palm oil contract on the Bursa Malaysia Derivatives Exchange closed 2.61 percent higher at 2,240 ringgit ($515.54) a tonne. Prices earlier touched 2,248 ringgit, the highest level since July 6, and have now gained more-than 12 percent so far this month.
"The drivers today include the ringgit factor," said a trader with a commodities brokerage in Kuala Lumpur. "Secondly, people are talking about the El Nino effect happening in Indonesia and indications that El Nino is in Malaysia." Traded volume stood at 52,875 lots of 25 tonnes each, well above the average 35,000 lots usually traded at the close.
There is a growing consensus among weather forecasters for a strong El Nino this year, with some climate experts warning that it could be one of the strongest on record. "A strong 2015/16 El Nino event of the 1997/98 magnitude could disrupt palm oil supply growth in Indonesia and Malaysia," Ivy Ng, an analyst at CIMB Investment Bank Bhd, said in a note. "This may not be sufficient to meet the rising demand for palm oil and will be positive for CPO prices." In competing vegetable oil markets, the most active January soybean oil contract on the Dalian Commodity Exchange fell 1.2 percent, while the US December soyoil contract added 0.84 percent in early European trading.
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