KUALA LUMPUR (Reuters) - Malaysian palm oil futures rose to their highest in nearly two weeks on the first trading day of 2019, after world’s largest edible oil importer India announced import tax cuts, amid expectations of a fall in production.
The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange was up 2.1 percent at 2,166 ringgit ($523.82) a tonne at the close of trade, its strongest daily gains in two and a half weeks.
It earlier rose as much as 2.4 percent to 2,171 ringgit, its strongest levels since Dec. 21.
Trading volumes stood at 32,672 lots of 25 tonnes each at the end of the trading day.
“Palm is higher today on India’s import tax cut and production, which is expected to be down for the whole month also,” said a futures trader in Singapore.
Palm oil output in Malaysia, the second largest producer of the vegetable oil, seasonally declines in the first few months of the year after peaking in the previous quarter.
November production had slid 6.09 percent from the previous month to 1.85 million tonnes, according to industry regulator data.
India, the world’s largest importer of edible oils, said late on Monday it would lower the duty on crude palm oil imports to 40 percent from 44 percent, while a tax on refined oils was cut to 50 percent from 54 percent.
Malaysian shipments of refined palm oil, however, will be taxed at 45 percent compared with 54 percent earlier.
Despite the tax cuts, traders expect market gains to be short-lived as palm inventory levels in Southeast Asia remain high.
In other related oils, the January soybean oil contract on the Dalian Commodity Exchange rose 1 percent and the Dalian January palm oil contract gained 2.3 percent.
Palm oil prices are impacted by changes in soyoil prices, as they compete for a share in the global vegetable oil market.
Reporting by Emily Chow; Editing by Rashmi Aich