Palm gains over 2% on firmer soyoil, softer stock build

Malaysian palm oil futures surged over 2% on Wednesday, reversing a six-day losing streak, thanks to stronger soyoil prices and industry data indicating that stockpiles grew less than anticipated. The January delivery benchmark palm oil contract on Bursa Malaysia's Derivatives Exchange climbed 107 ringgit, or 2.51%, to 4,363 ringgit ($1,076.22) per metric ton by midday.

This upward movement was driven by improved overnight soybean oil prices and a smaller-than-expected increase in Malaysian inventories, as reported by the Malaysian Palm Oil Board, according to David Ng, a trader at Kuala Lumpur-based firm Iceberg X Sdn Bhd. However, market sentiment remains sensitive to fluctuations in soybean oil and export rates, he added.

In October, Malaysia's palm oil stocks hit a record high, outpacing the peak from the previous month, due to a surge in output that outweighed a rebound in exports. Nevertheless, this figure was lower than the expected 3.75 million tons, according to a Reuters survey. Cargo surveyors estimated that Malaysian palm oil product exports from November 1-10 declined by 1.9% to 2.3% compared to the previous month.

The most-traded soyoil contract in Dalian rose 1.16%, while its palm oil contract increased by 2.32%. On the Chicago Board of Trade, soyoil prices climbed 0.72%. As an oil derivative, palm oil mirrors the price movements of other edible oils, competing for a share of the global vegetable oil market. The Malaysian ringgit, the commodity's trading currency, weakened by 0.44% against the dollar, making it slightly more affordable for foreign currency holders.

The rise in oil prices follows a two-month low, as the market balances hopes for a de-escalation in the US-Israeli conflict with Iran and fears of attacks on shipping in the Strait of Hormuz. A stronger crude oil future makes palm oil an attractive option for biodiesel feedstock.