KUALA LUMPUR, Dec 28 (Reuters): Malaysian palm oil futures hit their highest in over a month on Friday, notching their biggest weekly gain in eight weeks as fears of floods disrupting supplies in the world's second-largest producer outweighed earlier losses.
Nearly 120,000 people have been evacuated from their homes as of Friday afternoon, state news agency Bernama reported, in the worst flooding Malaysia has seen in decades as heavy rains pounded the country.
The flooding could reduce crude palm oil output by about 18 per cent for December, planters and traders told Reuters, a bigger disruption than had previously been expected.
Market players said despite the strength of the ringgit which was up 0.30 per cent to 3.4860 per dollar, investors will likely refrain from a sell-off on prospects of tighter palm supplies.
"In the short term, there will definitely be some impact on sentiment. The dropping supply is there for sure," said a trader with a foreign commodities firm in Kuala Lumpur.
The benchmark March contract inched up 1.4 per cent to 2,249 ringgit ($645) per tonne by Friday's close, after hitting 2,252 ringgit in late trade, their highest since Nov. 19.
After seven straight days of gains, the contract was up 4.5 per cent this week, posting the biggest weekly gain since the end of October.
Total traded volume stood at 32,884 lots of 25 tonnes, just below the usual 35,000 lots.
India, the world's biggest vegetable oil buyer, said on Thursday it will raise its import tax on crude edible oils and refined oils by 5 per centage points, in a decision that may dampen palm prices, traders and analysts said.
"This news is negative for palm oil producers as it will raise the cost of imported edible oils, including palm oil in India," said CIMB analyst Ivy Ng.
"This will reduce the competitiveness of palm oil against local edible oils and could hurt demand for palm oil in India," she added.
Meanwhile, cargo surveyor Intertek Testing Services reported that exports of Malaysian palm products during Dec. 1-25 fell 2.3 per cent to 1,077,140 tonnes compared with a November - the first drop this month as shipping activity slowed for the year-end holiday season.
Another cargo surveyor reported that exports for the same period fell 1.4 per cent.
In other markets, Brent crude oil futures traded steadily above $60 on Friday as a building supply glut and weak Japanese import data weighed on the market, while strong U.S. economic data published over Christmas provided support.
