(Sept 7): Palm oil rose as traders weighed the risk of supply disruptions from forest fires raging across Indonesia, the world’s biggest producer.

Benchmark futures climbed as much as 0.9% to RM4,975 per tonne in Kuala Lumpur as acrid haze from the fires blanketed large parts of Southeast Asia. Some harvesting has been disrupted, with farm workers drafted into firefighting efforts while palm fruit growth can also be affected by smoke and reduced sunlight.

The latest price move “reflects the haze situation in Indonesia, which is getting worse”, said David Ng, a senior trader at Iceberg X Sdn. The market is “concerned about the dry and hazy situation affecting output”, he said, adding that the tropical commodity was also supported by higher crude and vegetable oil prices. Elevated crude prices tend to make biofuels more competitive, boosting demand for palm oil.

While forest fires and the accompanying haze are a regular occurrence in Southeast Asia, often attributed to traditional and commercial land-clearing practices, this year’s severe El Niño weather pattern is intensifying and prolonging the adverse impacts.

That has created the conditions for wildfires and the spread of cross-border haze by prevailing southeasterly and southwesterly winds, the Asean Specialised Meteorological Centre said last week in its latest outlook. An expected increase in showers around October, ahead of the wet season, could ease the fire and haze situation, it added.

More than 202,000ha have been burned across the Indonesian islands of Borneo and Sumatra, and pollution levels have spiked both at home and in nearby countries including Singapore, Malaysia and the Philippines.

Drivers:

Prices:

Uploaded by Arion Yeow