Palm oil shares fell on Wednesday due to profit-taking after a recent rally supported by firm prices, but traders and analysts said the sector still has upside in the near term because demand is likely to outstrip supply.

Commodity prices fell sharply on Tuesday as investors took advantage of record high prices to take profits, a move accelerated by a rally in the U.S. dollar.

 

At 0243 GMT, shares of Golden Agri-Resources (GAGR.SI) fell 0.6%, First Resources (FRLD.SI) lost 1.9% and Indofood Agri (IFAR.SI) retreated 1%. 

However, shares of Wilmar International (WLIL.SI) gained 0.4%, bucking the trend as they had not risen as much as the other players recently because of their lower earnings leverage to the run-up in crude palm oil prices.

“A short-term correction is expected given that the prices have run up quite a fair bit. Palm oil has run into some sort of resistance at this sort of level,” said a Singapore analyst.

 

“We think prices will be firm in the first half but weaken in the second half. Supply for palm oil is still going to be tight in the next couple of months because of the adverse weather effects, but after that we are expecting a period of bumper harvest,” he added.