Palm oil up nearly three percent as demand outlook improves

Malaysian palm oil futures surged nearly 3 percent to their highest in a month on Wednesday on expectations for strengthening demand in coming weeks. The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange closed up 2.9 percent at 2,606 ringgit ($649.55) a tonne, its strongest daily gain in about nine months.
It earlier hit 2,612 ringgit, its highest level since December 4. The day's trading volume totalled 87,228 lots of 25 tonnes each. "The market is reacting towards the anticipation of better exports going forward," said a futures trader in Kuala Lumpur. Another trader said demand from China should pick up ahead of the Chinese New Year celebrations next month.
"We may experience a rally this month on the back of better demand and firmer external pricing," he added, referring to soyaoil on both the Chicago Board of Trade and China's Dalian Commodity Exchange. Palm oil prices track the performance of other edible oils, as they compete for a share in the global vegetable oils market. The March soyabean oil contract on the Chicago Board of Trade saw overnight gains of 0.9 percent, and was last up by 0.7 percent on Wednesday.
In other related oils, May soyabean oil on the Dalian Commodity Exchange was up 0.2 percent, while the Dalian January palm oil contract gained 0.5 percent. Malaysian palm oil shipments, which gained 6-9 percent on the month in December according to cargo surveyor data, are expected to rise further in January on improved demand from China.
The world's second-largest palm oil importer after India is expected to stock up ahead of the Lunar New Year celebrations, when demand for palm oil increases for cooking purposes. Global demand for Malaysian palm declined 11.9 percent to 1.35 million tonnes in November, as consumption fell during the year-end winter months when the tropical oil solidifies. Palm oil may test resistance at 2,694-2,707 ringgit per tonne within three months, a break above which could lead to a further gain to 2,814 ringgit, said Wang Tao, a Reuters market analyst for commodities and energy technicals.