Palm flat as El Niño fears counter rising stock levels; still poised for second weekly gain

Malaysian palm oil futures traded within a narrow range on Friday, as inventory levels increased and concerns over El Niño's effect on production and higher crude oil prices emerged. The October delivery contract for palm oil on the Bursa Malaysia Derivatives Exchange rose 3 ringgit, or 0.06%, to 4,727 ringgit ($1,158.01) per metric ton by midday.

The contract has climbed 1.03% this week, marking a second weekly increase. Pressure from elevated end-July inventories and weaker Chicago soyoil prices dampened gains, but worries about El Niño-related weather disruptions and higher energy costs kept losses in check, according to David Ng, a trader at Iceberg X Sdn Bhd, a Kuala Lumpur-based firm.

Malaysia's palm oil stocks hit a five-month high in July, as production outpaced rising export demand, according to the Malaysian Palm Oil Board. The most-traded soyoil contract in Dalian increased 0.6%, while its palm oil counterpart rose 0.78%. Soyoil prices on the Chicago Board of Trade fell 0.09%. Palm oil follows the price movements of other edible oils as it competes for a share of the global vegetable oil market.

Oil prices edged higher after the U.S. threatened an indefinite naval blockade of Iran, reigniting concerns about crude supply after a weaker demand outlook and a large build in U.S. stocks. A stronger crude oil price makes palm a more appealing option for biodiesel feedstock. The ringgit, palm's trade currency, strengthened 0.12% against the dollar, making the commodity slightly pricier for buyers holding foreign currencies.

India's edible oil imports hit their highest level in 10 months in July, as refiners increased purchases of palm oil and soyoil to replenish inventories ahead of the festival season, according to the Solvent Extractors' Association of India.