The most-active contract of palm olein on China’s Dalian Commodity Exchange closed 2.63% higher on Wednesday, hitting the highest in over seven and a half years. Meanwhile, crude palm oil futures also rose to 3,326 ringgit/tonne to hit an over eight-year high.

Malaysia’s Oct palm oil production fell 7.75% month on month to 1.72 mln tonnes, and its stockpiles declined 8.63% to 1.57 mln tonnes, according to a report by Malaysian Palm Oil Board.

Palm oil output is suffering from the resurgence of the COVID-19 in Malaysia, in addition to a seasonal production reduction, so that the supply is tightening. As the overall palm oil stocks are low both at home and abroad, palm oil prices still have a huge upward momentum. Besides, U.S. soybean exports are robust, and La Nina is likely to have an influence on soybean production in South America. Hence, the oils market is predicted to keep a strengthening trend.

There is a huge decline in China’s palm oil stockpiles. In the week ending November 6th, China’s edible palm oil stocks total 369,700 tonnes at ports, down by 9.6% from 409,000 tonnes a week earlier; up 21,700 tonnes or 6.23% from 348,000 tonnes in the previous month; down 240,800 tonnes or 39.44% from 610,500 tonnes in the corresponding period last year.

La Nina has postponed soybean planting in South America, so concerns over a production reduction could fuel bullish sentiment in the market. In addition, CBOT soybean futures also helped bolster palm oil prices. If weather conditions finally lead to a sharp cut in soybean production in South America, palm oil prices will probably continue an uptrend.