NEW DELHI: Malaysian palm oil futures edged up on Wednesday, extending gains from the previous session, as a bigger-than-expected fall in January inventories of the tropical oil in top producer Malaysia lent support.
The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange gained 45 ringgit, or 1.15%, to 3,946 ringgit ($825.18) by midday.
Palm is higher due to lower inventory levels in Malaysia, said Anilkumar Bagani, research head at Sunvin Group, a Mumbai-based vegetable oil brokerage.
However, the absence of fresh buying from key buyer China has capped gains, he said.
The rebound in palm oil prices is also likely to be capped by abundant supplies of rival soyoil and sunflower oil, which are “soft” oils available at discounts to tropical palm oil for the first time in more than a year.
Malaysia’s palm oil stocks fell more than expected to their lowest in six months at the end of January as production plunged to the lowest level in nine months amid steady exports.
Palm oil imports by India, the world’s biggest importer of vegetable oils, in January dropped more than 12% from a month ago to a three-month low as negative refining margins for crude palm oil prompted refiners to switch to rival soyoil.
Palm oil opens lower as market awaits January inventory data
Soyoil prices on the Chicago Board of Trade fell 0.77%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
Oil prices jumped 1% on Tuesday, starting the New Year higher as a Red Sea naval clash focused attention on potential Middle East supply disruptions and expectations of Chinese economic stimulus boosted the demand outlook in the world’s top crude importer.
Stronger crude oil futures typically make palm a more attractive option for biodiesel feedstock.
Palm oil may revisit its Feb. 9 high of 3,945 ringgit per metric ton, as it has quickly recovered from Tuesday’s low of 3,840 ringgit.
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