Crude palm oil futures in Malaysia ended the trading session higher on Tuesday, continuing their fifth straight session of gains. This was driven by concerns over low production levels and rising prices of competing oils.
The contract for palm oil with delivery in September on the Bursa Malaysia Derivatives Exchange closed up 111 ringgit, or 2.79%, reaching 4,090 ringgit (867.08 US dollars) per metric ton.
“Futures are rising due to interest from palm oil buyers in Dalanya, where a decrease in production is forecasted this month,” noted a trader from Kuala Lumpur.
It is expected that palm oil production in Malaysia from June 1 to 20 will decrease by 6.3% compared to the same period last year, according to traders and analysts citing data from the Malaysian Palm Oil Association.
The most active contract for soybean oil in Dalanya rose by 2.11%, while palm oil contract prices increased by 2.75%. Prices for soybean oil on the Chicago Commodities Exchange rose by 0.98%.
Palm oil prices are influenced by the movement of prices of similar oils as they compete for market share in the global vegetable oils market.
Societe Generale de Surveillance (SGS) forecasts palm oil exports from Malaysia in June to be at 1,202,864 tons, compared to 1,161,370 tons exported in May.
However, according to AmSpec Agri estimates, exports decreased by 15.4% to 1,188,180 tons.
Meanwhile, the meteorological department predicts increased rainfall in India in July compared to June, which could help boost agricultural production and economic growth in Asia's third-largest economy.
Oil prices remained almost unchanged on Tuesday, trading near two-month highs reached in the previous session, due to expectations of increased demand in the summer season and potential supply issues due to Hurricane Beryl.
The rise in crude oil prices makes palm oil a more attractive option for biodiesel production.
(1 US dollar = 4.7170 Malaysian Ringgit)
