Malaysian palm oil futures snapped a six-day winning streak on Friday as the ringgit ticked up and traders reacted to India's tax hike on edible oil imports, but fears of floods disrupting supplies kept palm headed for its biggest weekly gain in eight. Over 100,000 people have been evacuated from their homes in the worst flooding Malaysia has seen in decades as heavy rains pounded the world's second-largest palm grower.
The worst-hit states are Kelantan, Terengganu, Pahang and Perak, which together account for about 30 percent of Malaysia's palm supply.
Market players said despite the stronger ringgit which was up 0.45 percent to 3.4810 per dollar, investors will likely refrain from a sell-off on prospects of tighter palm supplies.
"In the short term, there will definitely be some impact on sentiment. The dropping supply is there for sure," said a trader with a foreign commodities firm in Kuala Lumpur.
By the midday break, the benchmark March contract lost 0.5 percent to 2,205 ringgit ($633) per tonne, its first fall after six straight days of gains.
The contract however was up 2.4 percent this week and is on track for its biggest weekly gain since end-October.
Total traded volume stood at 9,039 lots of 25 tonnes, below the usual 12,500 lots.
India, the world's biggest vegetable oil buyer, on Thursday raised its import tax on crude edible oils and refined oils by 5 percentage points each to protect local farmers from rising imports from Malaysia and Indonesia.
"(We) expect news of import duty hike by India on crude and edible oil to dent market sentiment," said a second Malaysia-based palm oil trader.
"Ability to hold above 2,200 ringgit is crucial as a break below this may drag prices to the next crucial support at 2,163-2,175 ringgit," the trader added.
Meanwhile, cargo surveyor Intertek Testing Services reported that exports of Malaysian palm products during December 1-25 fell 2.3 percent to 1,077,140 tonnes compared to a November - the first drop this month as shipping activity slowed for the year-end holiday season.
In other markets, Brent crude oil futures gave up most of its early gains on Friday as a building supply glut and weak Japanese import data weighed on the market, but contracts held above $60 a barrel supported by US economic data published over Christmas. The most active May soybean oil contract on the Dalian Commodity Exchange rose 0.2 percent in early Asian trade. The US soyoil contract is closed for Christmas holidays and will reopen on Monday.
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