Malaysian palm oil price sees biggest gain in three weeks on output concerns

Malaysian palm oil futures fell to a two-week low in late trade on Tuesday, dropping nearly 1 percent as the market was weighed down by expectations of rising production.

KUALA LUMPUR: Malaysian palm oil futures saw their strongest daily gain in three weeks on Tuesday, rebounding from two days of losses, on concerns of weaker output growth.

The market was supported in early trade by gains in global crude oil prices and in rival oilseed soy on the Chicago Board of Trade (CBOT).

The benchmark palm oil contract for December delivery on the Bursa Malaysia Derivatives Exchange rose 2.2 percent to 2,749 ringgit a tonne, its best daily percentage gain since Sept. 5.

Traded volumes totalled 59,914 lots of 25 tonnes.

"The market rose on production worries, people are worried that it's not coming up," said a Kuala Lumpur-based futures trader, quoting the release of industry data from a Malaysian millers association he had received.

Production data from the Southern Palm Oil Millers Association showed a 0.8 percent decline in output between Sept. 1-25, he said.

Another trader said earlier in the day that palm was tracking stronger crude oil prices and gains in CBOT soyoil.

Brent crude hit a 26-month high on Tuesday, supported by Turkey's threat to cut crude flows from Iraq's Kurdistan region to the outside world.

Palm is affected by movements in crude oil, as the tropical oil is used as feedstock for producing biodiesel, a fuel substitute.

The October soybean oil contract on the Chicago Board of Trade was up 0.5 percent, while the January soybean oil contract on the Dalian Commodity Exchange fell 0.4 percent.

Price movements of related edible oils including soy affect palm oil, as they compete for a share of the global vegetable oils market.

In other related oils, the January palm olein contract dropped 0.4 percent. - Reuters