KUALA LUMPUR (Reuters) - Malaysian palm oil futures recovered from early losses on Tuesday on bargain buying, but gains were capped by worries of a disruption to export shipments in case of an escalation in Middle East tensions.
The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange edged up 26 ringgit, or 0.9%, to 3,068 ringgit ($749.39) during the midday break.
Palm oil had traded down for two straight sessions, easing from its near-three year high gained last week when it hit 3,149 ringgit on Friday - the highest since January 2017.
“Lower Dalian and higher ringgit kept the market depressed at opening, but a rebound in the equity markets from bargain buying helped reverse losses,” said Sathia Varqa, owner and co-founder of Singapore-based Palm Oil Analytics.
Tensions between the United States and Iran have weighed on equity markets and some commodity markets in Malaysia. The market remain nervous as a war in the Middle East could disrupt shipment routes and drive up freight charges, traders said.
Losses were limited by forecasts of lower stockpiles and production in December. Malaysia’s palm oil stockpiles likely fell 8.5% from November to 2.06 million tonnes, the lowest in 27 months, a Reuters survey showed on Sunday.
Yield of the tropical oil is also expected to be lower in the first half of 2020 due to poor rainfall and lower fertilizer usage in top producers Malaysia and Indonesia in early 2019.
A stronger ringgit, palm’s currency of trade, makes the edible oil more expensive for holders of foreign currency. The ringgit was up 0.2% against the dollar.
Dalian’s most-active soyoil contract was unchanged, while its palm oil contract both dipped 0.9% lower as Chinese funds closes their books ahead of the Chinese New Year holidays. Elsewhere, soyoil prices on the Chicago Board of Trade gained 0.2%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
Reporting by Mei Mei Chu; Editing by Arun Koyyur
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