Palm oil futures in Malaysia headed for a second week of gains as stockpiles in the world’s second- biggest producer of the commodity dropped to a nine-month low.
Output of the vegetable oil in the Southeast Asian country fell in January for a second month to 1.33 million metric tons, the nation’s palm oil board said yesterday. This cut stockpiles 8.3 percent to 1.83 million tons.
The drop in stockpiles “moves the industry one more step away from the over-supply situation,” said a research report by ECM Libra Capital Sdn. in Kuala Lumpur.
April-delivery palm oil gained 0.2 percent to 1,928 ringgit ($533) a metric ton on the Malaysia Derivatives Exchange. Earlier, futures gained as much as 1 percent to 1,945 ringgit.
Production of the tropical oil typically peaks in the second half of the year. Yesterday’s data shows output likely peaked in November, easing concerns about output exceeding demand during a global recession. Both Malaysia and Indonesia, which control 90 percent of world output, had record production in 2008.
Palm oil may average 2,000 ringgit this year on “improved supply-demand dynamics,” according to an AmResearch report from Kuala Lumpur. Prices have averaged 1,861 ringgit this year.
Futures climbed to a four-week high this week after drought damaged soybean crops in South America, the biggest exporters of the vegetable oil crushed from the oilseed. Palm and soybean oils are substitutes.
“There’s an upside to crude palm oil prices if the supply of competing oils tightens,” Citigroup Inc. analyst Penny Yaw said today.
Soybean oil futures for March delivery was unchanged at 33.2 cents a pound at 6:03 p.m. Singapore time in after-hours trading on the Chicago Board of Trade. That left the commodity 37 percent more expensive than palm, according to Bloomberg data.
Palm oil’s appeal lies in the substantial discount it trades at compared with soybean oil, said Alvin Tai, an analyst at OSK Research Sdn. in Kuala Lumpur today.
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