KUALA LUMPUR (Reuters) - Malaysian palm oil futures rose to their highest in nearly two weeks in early trade on Tuesday, in line for a third consecutive day of gains, on expectations of slowing output.
The benchmark palm oil contract for July delivery on the Bursa Malaysia Derivatives Exchange rose 0.2 percent to 2,388 ringgit ($604.86) a tonne at the midday break. It earlier rose as much as 0.6 percent to 2,398 ringgit, its highest level since April 26.
Trading volume stood at 22,031 lots of 25 tonnes each at the midday break.
“Market is up as production seems to have lost some pace,” said a futures trader from Kuala Lumpur, adding that production in May, however, should pick up.
Palm oil output for April is forecast to remain flat at 1.57 million tonnes, following a surge in March when output for the month rose its highest since 2000, according to a Reuters poll.
Another trader added that a favourable spread of gas oil over palm oil supported the market as well. Palm oil is used as feedstock to produce biodiesel, which is economical to produce when oil prices are high.
Palm oil jumped in Monday’s session tracking gains in crude oil prices, which rose on concerns over trouble for Venezuelan oil company PDVSA and the possibility that the United States could re-impose sanctions on Iran.
While both Brent and U.S. West Texas Intermediate crude futures fell over 1 percent around 0500 GMT on Tuesday, gas oil’s premium over palm are still trading around its highest levels in over three years.
In other related oils, the Chicago July soybean oil contract was down 0.2 percent, while the September soybean oil on China’s Dalian Commodity Exchange also fell 0.2 percent.
The Dalian September palm oil contract was down 0.3 percent.
Palm oil is impacted by movements in rival edible oils as they compete for a share in the global vegetable oils market.
Palm oil may gain more into the range of 2,417-2,446 ringgit per tonne, said Wang Tao, a Reuters market analyst for commodities and energy technicals.
Reporting by Emily Chow; Editing by Vyas Mohan