06.02.2020 (Business Recorder) - Malaysian palm oil futures rebounded from last week's sharp fall with a 5.1% jump on Wednesday, lifted by expectations of a steep drop in January production and strength in rival soyaoil. The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange settled up 138 ringgit at 2,804 ringgit ($681.16) per tonne, recording its third-straight session of gains.
The contract tumbled almost 9% last week as fears of the fast-spreading coronavirus in China stoked concerns that it would disrupt supply chains and hit demand from the second-largest palm importer.
However, reports that scientists have developed an effective drug against the virus in China on Wednesday helped boost prices, a Kuala Lumpur-based trader said.
A leading British scientist has made a significant breakthrough in the race for a coronavirus vaccine by reducing a part of the normal development time from “two to three years to just 14 days", Sky news reported on Wednesday.
“Lower January output and expectation of stocks falling below 2 million tonnes are supporting higher prices today," said Sathia Varqa, co-founder of Singapore-based Palm Oil Analytics.
Malaysian palm oil inventories likely tumbled 12% to 1.76 million tonnes from December, its lowest since June 2017, with production also likely falling 9% to 1.21 million tonnes from the month before, a Reuters surveyed showed on Wednesday.
Dry weather and lower fertiliser usage in the second largest palm producer early last year is expected to suppress output in the first half of 2020.
“There is some bargain buying into the palm oil deliveries for March to the second quarter of 2020, given the opportunity offered by the recent reversion in cash prices," said Marcello Cultrera, institutional sales manager at Phillip Futures in Kuala Lumpur.
On Tuesday, Pakistan's Prime Minister Imran Khan said the country would buy more palm oil from Malaysia to offset lost sales after top buyer India imposed import curbs on the product last month.
Palm also tracked gains from higher rival oil prices.
Dalian's most-active soyaoil contract rose 1.8%, while its palm oil contract was up 2.3%. Soyaoil prices on the Chicago Board of Trade also gained 2.7%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
Copyright Reuters, 2020