Malaysian palm oil futures rose on Wednesday, reversing earlier losses, after a leading analyst forecast higher prices in the near term. Benchmark palm oil futures for May delivery on the Bursa Malaysia Derivatives Exchange closed 0.6 percent higher at 2,875 ringgit ($645.78) per tonne. Trade was tracking forecasts coming out of a palm industry conference in Kuala Lumpur this week.
Malaysian palm oil futures are expected to rise to 3,000 ringgit a tonne because of tight inventories after last year's drought, though a decline by June is still likely as production recovers, widely followed analyst Dorab Mistry said on Wednesday. "Mistry made sense. End stocks are low and looks like nearby tightness will still be there," said a palm trader. Despite the near term bullish forecast, Mistry and others see a dip in prices in the second half of the year.
Tight supplies following a drought in 2015-16 are expected to support the market over the next two months, but downward pressure should build from May as output picks up in Indonesia and Malaysia, analysts and industry officials said at the conference. Palm oil may test a support of 2,820 ringgit per tonne, a break below which could cause a further loss to the next support at 2,783 ringgit, said Reuters market analyst for commodities and energy technicals Wang Tao. In related vegetable oils, soyabean oil on the Chicago Board of Trade climbed 0.6 percent, while the May soyabean oil contract on the Dalian Commodity Exchange dropped up to 1.9 percent.