Malaysian palm futures rose in early trade on Monday posting their sharpest gain in a week and on track for a second winning session as lower output and stronger rival oils on China's Dalian Commodity Exchange aided market sentiment. Benchmark palm oil futures for February delivery on the Bursa Malaysia Derivatives Exchange rose 0.9 percent to hit an intraday high of 3,104 ringgit ($698) a tonne at the midday break, palm's strongest since Nov. 28.
Traded volumes stood at 13,641 lots of 25 tonnes each. "Production is low and there is not enough oil in the market," said a trader from Kuala Lumpur, adding that the weak ringgit also supported palm prices. Another trader added that palm prices were up tracking stronger related oils on the Dalian Commodity Exchange. Palm output is forecast to fall 2.8 percent in November to 1.63 million tonnes, as fresh fruit yields are still bearing the impact of last year's crop damaging El Nino, according to a Reuters poll of eight traders, planters and analysts.
Despite weaker production, Malaysia's palm oil stocks in November are seen growing at its sharpest monthly pace in five months, as a slump in exports outweigh production. A weaker ringgit, palm's traded currency, also supports the market by making the tropical oil cheaper for holders of foreign currencies.
The ringgit has lost over 6 percent since the start of November as it slides against a surging US dollar. It strengthened 0.1 percent to 4.4470 per dollar at noon on Monday. In related edible oils, the January soyabean oil contract on the CBOT was down 0.1 percent, while the May soyabean oil contract on the Dalian Commodity Exchange rose 0.2 percent. The May contract of palm olein on the Dalian Commodity Exchange was up 0.8 percent. Stronger performing rival oils typically lifts palm prices, as they compete for a share in the global vegetable oils market.