Malaysian palm oil futures rose to their highest in more than a week on Friday, tracking gains in overseas commodity markets, although prices failed to move far above an almost 10-month low hit this week as exports fell and production picked up.
Benchmark palm oil futures on the Bursa Malaysia Derivatives Exchange closed 1.3% higher at RM2,279 (US$577.69) a tonne, after rising to RM2,299 — the loftiest since July 5.
Palm oil ended 1.7% higher for the week, the first gain in six.
Even then, prices are not far from the RM2,186 hit earlier this week — the lowest level since September 2015.
The weakness in palm oil prices in recent weeks has been largely driven by waning demand for exports during and after Ramadan. Buyers typically stock up the vegetable oil ahead of the Muslim holy month, which this year began on June 6.
In June, palm oil exports by Malaysia, the world's second-biggest producer after Indonesia, fell to a four-month low while inventories at home rose for the first time in seven months, data from an industry regulator shows.
Malaysia's shipments over July 1–15 fell almost 1% to 561,471 tonnes from a month earlier, cargo surveyor Intertek Testing Services said on Friday.
The country will lower its crude palm oil export tax to 5% in August from 6% in July, a move that is likely to encourage outbound shipments, but traders cautioned that a pick-up in output could pressure prices.
"Unless the overseas market turns negative, prices may head for further technical correction but July production growth may cap upside," a Kuala Lumpur-based trader said.
Dryness across Southeast Asia related to an El Nino weather event that recently ended is expected to curb global palm output this year but an emergence of La Nina and resultant rains in the region could help improve fresh fruit yields.
For now, however, palm is tracking a sharp 3.2% gain in the most actively traded September contract for palm olein on the Dalian Commodity Exchange. China is the world's No.2 palm oil consumer after India.
In other oilseed markets, Dalian soybean oil, a substitute for palm oil, edged 0.2% up, while US soyoil futures gained 0.5%.
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