Palm gains capped as weekly losses extend to second week

Malaysian palm futures closed higher on Friday. They reversed earlier losses but recorded a second weekly decline as forecasts for rising production and inventories limited the gains.

The benchmark contract for palm oil delivery in July on the Bursa Derivatives exchange rose 14 ringgit or 0.37% to 3,815 Ringgit ($888.45).

The contract dropped 1.7% in the last week.

Crude palm futures fell earlier in the day as fears over the rising production and stockpiles in the coming week weighed on the market sentiment. David Ng is a proprietary trader with Kuala Lumpur based trading firm Iceberg X Sdn. Bhd.

As the palm oil industry nears its peak production season in the second half, it is expected that the output will increase significantly.

On May 13, the Malaysian Palm Oil Board is releasing its monthly data on supply and demand.

Dalian's palm oil contract, which is the most active contract, rose by 0.28%. Chicago Board of Trade Soyoil Prices grew 0.5%.

As palm oil competes to gain a share in the global vegetable oils industry, it tracks the prices for rival edible oils.

Palm's trade currency, the ringgit (the palm equivalent of the dollar), has fallen by 0.4%, making it cheaper for buyers who hold foreign currencies.

Oil prices are on the rise and poised to gain a week-long gain, as tensions in trade between China and the United States, two of the world's largest oil consumers, have eased and Britain has announced a "breakthrough deal" with America.

Palm oil is a better option as a biodiesel feedstock due to the stronger crude oil futures. $1 = 4.2940 Ringgit (Reporting and editing by Ashley Tang, Sumana Nandy, and Shreya biswas)

(source: Reuters)