Malaysia palm oil rises ahead of Ramadan

Palm oil futures in Malaysia, the global benchmark, rose amid supply concerns as demand picks up for the Muslim holy month of Ramadan, which starts next week.

Rising demand in Indonesia and Malaysia, which control 90 per cent of the world's palm oil output and have predominantly Muslim population, may lower supplies for export. Muslims fast between dawn and sunset during Ramadan, with communal meals during non-fasting hours.

Palm oil for November delivery on the Malaysia Derivatives Exchange gained as much as 29 ringgit, or 1.2 per cent, to 2,488 ringgit ($708) a tonne. The contract traded at 2,473 ringgit a tonne at the midday break.

"There is demand for the oil ahead of the Muslim holy month,'' said Amol Tilak, an analyst at Kotak Commodities in Mumbai. Palm oil output picks up from October to December and "it would be advisable to go short rather than remain long.''

Palm oil has been trading at a backwardation, where the future price is less expensive than the price for imminent delivery, often signaling near-term supply shortages. Palm oil for December delivery closed at 2,453 ringgit a tonne at the pause in trading.

Soybean oil, the main substitute for palm oil, climbed 0.3 per cent to 38 cents a pound at 1:33 pm Malaysian time, the highest intra-day level since August 9. Palm oil is trading 6.07 cents a pound cheaper than soybean oil, the ninth day that the price differential is wider than the one-year trading average, Bloomberg data shows.