KUALA LUMPUR: Malaysian palm oil futures ended higher on Friday, snapping three straight sessions of losses and turning around weekly prices to post their first gain in three weeks, although predictions of surging supplies in the coming months kept investors wary.
Prices in early trade had hovered near month-and-a-half lows seen on Thursday as prospects of swelling supply of the tropical oil muted investor interest, but the ringgit's poor performance late Friday helped stoke demand and lift palm prices.
The ringgit eased 0.4 percent on dollar-short covering in thin trading after a report showing US jobless claims fell last week renewed some expectations that the Federal Reserve may scale back its stimulus soon.
A weaker ringgit currency makes the feedstock cheaper for overseas buyers.
Palm oil supply could outstrip demand as top world producers Indonesia and Malaysia head into seasonally higher output cycles, said analysts and traders, further depressing prices which have been on a losing streak since 2011.
"Market players expect production to seasonally pick up towards the beginning of the monsoon season," said a trader with a foreign commodities brokerage.
The benchmark December contract on the Bursa Malaysia Derivatives Exchange rose 2.0 percent to 2,312 ringgit ($716) per tonne by Friday's close. Prices for the week rose 0.5 percent, its first gain in three weeks.
Total traded volumes stood at 35,273 lots of 25 tonnes each, slightly above the average 35,000 lots.
Amid forecasts of surging output, both Indonesian and Malaysian governments have pledged to boost domestic consumption of palm oil for biodiesel to help whittle down stockpiles.
Palm oil feedstock is often used as a green alternative to produce biofuels.
Indonesia's consumption of its palm oil is expected to rise by 5.9 percent to 9 million tonnes in 2014, fuelled by a mandatory policy to raise palm oil's proportion in diesel to 10 percent from 7.5 percent, Indonesian Palm Oil Board Chairman Derom Bangun said.
The second-largest producer, Malaysia, said it was looking to push forward the same policy from its current 5 percent requirement, but has not yet specified details.
In other markets, Brent crude oil dropped below $109 a barrel on Friday, heading for its third straight weekly loss, with diplomatic efforts over Syria and Iran helping ease worries about risks to supply from the Middle East.
In vegetable oil markets, the US soyoil contract for December rose 0.6 percent in late Asian trade. The most-active January soybean oil contract on the Dalian Commodities Exchange fell 0.9 percent.
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