SINGAPORE: Malaysian palm oil futures extended gains for a sixth straight session on Wednesday, rising over 3% to hit a more than 18-month high, on expectations of declining production but a stronger ringgit capped gains.
The benchmark palm oil contract for January delivery on the Bursa Malaysia Derivatives Exchange closed 3.4% higher at 2,498 ringgit ($597.82) per tonne.
It earlier hit as high as 2,499 ringgit per tonne, which was its highest since April 6 last year.
The rally is due to strength in palm oil on the Dalian Commodities Exchange as well as talks that production has been declining, a Kuala Lumpur-based trader told Reuters.
Dalian's January palm oil contract on Wednesday last traded 1.8% higher at a record 5,220 yuan($740.02) per tonne.
Palm oil on the Dalian has been surging on higher logistic costs which drove Chinese traders to purchase domestic palm instead of imports as well as bullish export sentiment. "China's palm oil market is bullish.
It is mainly the biodiesel story, the market is expecting Indonesia and Malaysia to implement higher biodiesel mandates next year," said Sandeep Bajoria, chief executive of Sunvin Group, a Mumbai-based vegetable oil importer.
Malaysia said last week that implementation of the neighbours' biofuels mandates will boost annual consumption up to 1.3 million tonnes and 10 million tonnes a year respectively, adding that they would challenge a European Union law to limit palm oil use in biofuels.
Dalian's soyoil contract also rose on Wednesday by 0.6%. Elsewhere, U.S. soyoil futures on the Chicago Board of Trade was 0.8% higher.
Palm oil is affected by price movements in related oils as they compete for share in the global vegetable oils market. However, gains were capped by a stronger ringgit, which was last up 0.1% against the dollar on Wednesday.
This made the edible oil more expensive for holders of foreign currency. Palm oil FCPOc3 may break a resistance at 2,461 ringgit per tonne, and rise to 2,515 ringgit, driven by a wave C, Reuters analyst Wang Tao said - Reuters
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