Palm oil hits highest since Feb 11 on lower output forecast

Malaysian palm oil futures rose to a five-and-a-half-month high on Friday, tracking rising soyoil prices, while underlying expectations of output drop due to heavy rains continued to boost sentiment.

Palm oil for October delivery on the Bursa Malaysia Derivatives Exchange rose 0.85% to 2,731 ringgit ($641.83) a tonne, as of 0253 GMT.

It rose as high as 1.5% in early trade.

FUNDAMENTALS

Two leading industry analysts, however, told Reuters palm oil prices will fall by the fourth quarter due to higher output and inventory levels, dampening a rally that sent the tropical oil to a five-month high this week.

The Council of Palm Oil Producing Countries (CPOPC) said on Wednesday the prospect of a La Nina weather pattern bringing wetter-than-normal weather to Indonesia and Malaysia could hit crop production.

CPOPC forecast Indonesia's crude palm oil production in 2020 would be 1-2 million tonnes below last year's 44 million tonnes, while output in Malaysia is expected to drop 4.3% to 19 million tonnes.

Dalian's most-active soyoil contract rose 0.90%, while its palm oil contract gained 2.98%. Soyoil on the Chicago Board of Trade was up 0.3%.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

Palm oil may rise to 2,739 ringgit per tonne, as it has broken a resistance at 2,700 ringgit, Reuters technical analyst Wang Tao said.

MARKET NEWS

Financial markets greeted Friday with a number of milestones as the euro celebrated a 21-month peak against an embattled dollar, while Asian equities paused short of a six-month top and gold neared its highest on record.