Malaysian palm oil futures closed more than 1% higher on Thursday, tracking gains in the crude oil market, as traders await key export and production data from the world’s second-largest producer.
The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange closed 55 ringgit, or 1.4%, higher at 3,961 ringgit ($844.20) per metric ton. The contract had lost 3.8% on Tuesday, its biggest one-day drop since May 31 last year.
Anilkumar Bagani, research head of Mumbai-based vegetable oils broker Sunvin Group, attributed the rebound to “bargain buying based on some support levels after the correction in prices,” as well as higher energy prices in Asia providing additional support.
Bagani also noted that key palm oil buyer India is gradually increasing its purchases, while China is also active in the market, and he expects prices to rise further from here.
Crude oil prices extended gains from the previous session amid growing expectations that the U.S. Federal Reserve will cut interest rates in September. Stronger crude oil futures make palm oil a more attractive option for biodiesel feedstock.
Other vegetable oil prices also rose, with Dalian’s most-active soyoil and palm oil contracts gaining 1.2% and 1.6% respectively, while soyoil prices on the Chicago Board of Trade rose 1.5%.
One Singapore-based broker noted that palm oil is currently trading at a discount compared to other oils, which has provided strength to the market.
Investors are now shifting their focus to the monthly palm oil data from the Malaysian Palm Oil Board (MPOB), due on June 10. According to a Reuters survey, Malaysian palm oil inventories by the end of May were at 1.75 million metric tons, up 0.39% from April, while exports of palm oil products were estimated to have jumped by 14.32% to 1.41 million tons due to a recovery in palm’s competitive price to soybean oil.