Malaysian palm oil futures hit a 23-month high in trade on Monday, driven by lowered production forecasts and improving export demand. The palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange rose 0.2 percent to settle at 2,685 ringgit ($662) per tonne at the close of trade on Monday after touching a high of 2,698 ringgit, its strongest level in nearly two years.
Trade volumes were 42,649 lots of 25 tonnes each in a day. "Production is still down and exports are getting higher. The bulls are not going to leave it," said a trader from Kuala Lumpur. "Demand has started to come in from India as there's the colour festival and Good Friday coming up." Global palm oil production is expected to drop by 2 million to 3 million tonnes this year due to the dry weather effects of an El Nino, according to leading industry analysts. The weather event brings scorching heat across Southeast Asia, reducing fruit yields and output.
Malaysian palm oil exports rose 20-23 percent in March 1-20 compared with the corresponding period a month ago, driven by Indian demand. Palm oil faces a resistance at 2,695 ringgit per tonne, a break above which could lead to a gain to 2,729 ringgit, said Reuters market analyst for commodities and energy technicals Wang Tao. In competing vegetable oils, the September soybean oil contract on the Dalian Commodity Exchange edged up 0.2 percent, while the May Chicago Board of Trade soyoil contract lost 0.6 percent. Crude palm kernel oil's offer price stood at 5241.47 ringgit per tonne on Monday evening, according to assessment prices by Thomson Reuters.
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