KUALA LUMPUR: Palm oil futures are trading at the highest in almost eight months amid expectations of higher demand from major buyer China.
Futures in Kuala Lumpur rose for a second day, adding as much as 0.9% to 2,918 ringgit a ton, to trade at the highest since Jan. 23. Prices are up 3.8% so far this week.
The palm oil market is still upbeat on estimates for a 12.5% increase in demand from September 1-15, mainly due to increased appetite from China as it restocks its reserves and meets higher domestic demand, according to Marcello Cultrera, institutional sales manager and broker at Phillip Futures in Kuala Lumpur.
Prices may reach their higher range of 2,950 to 3,050 ringgit/ton by month end, though increase in production may have negative effect on prices, he said. The market will be watching for production data from the Malaysian Palm Oil Association, he said.
Palm oil shipments from Malaysia rose 12.4% from a month earlier to 780,305 tons during Sept. 1-15, according to AmSpec Agri.
Fitch Ratings sees crude palm oil prices likely to drop in the next few months as improved weather conditions support yields and output in the second half.
Still, CPO prices may remain strong if the La Nina weather pattern affecting soybean yields in the Americas and a labor crunch in Malaysia could delay palm-fruit harvesting ahead of the peak production season around September, Fitch said in Sept. 14 report. - Bloomberg
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