Malaysian palm oil extended earlier gains to touch a five-month high on Friday, with prices supported by lower output expectations due to a heavy monsoon and strong Chinese demand, although eurozone debt jitters limited the upside. Benchmark January palm oil futures on the Bursa Malaysia Derivatives Exchange closed 1.1 percent higher at 3,248 Malaysian ringgit ($1,028) per tonne. Prices earlier touched a peak of 3,270, a level not seen since June 15.
Traded volumes for the January palm contract were at 21,790 lots of 25 tonnes each, compared with a near two-month high at 22,387 lots on Thursday. "It's been raining every day here and supporting the palm price," a Kuala Lumpur-based trader said. "We are getting a lot of rain in the north of the country." Benchmark palm prices have surged about 18 percent since lows of below 2,800 ringgit hit in early October, and almost 4 percent this week.
Many traders are bullish on the fourth quarter and first quarter of next year, due to the onset of the monsoon season in dominant Southeast Asian producers. Lower output is expected as the top producers Indonesia and Malaysia enter the rainy season and the La Nina weather pattern returns.
"It appears that nobody is in a hurry to sell palm and its derivatives," said a second Malaysia-based trader. "Even the global negative inputs are being brushed to the side. Malaysian palm oil will retreat to 3,133 ringgit per tonne, as indicated by its wave pattern and a Fibonacci retracement analysis, Reuters market analyst Wang Tao said. Palm oil demand is forecast by many traders to remain robust. Exports of Malaysian palm oil products for November 1-15 rose, cargo surveyors Intertek Testing Services and Societe Generale de Surveillance said earlier this week.
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