Palm Oil Futures Near Two-Week High on Soybean, Crude Oil Rally

By Feiwen Rong

July 4 (Bloomberg) -- Palm oil futures in Malaysia, the global benchmark, traded near a two-week high as crude oil hovered near its all-time high and soybeans rallied to a record, improving prospect for higher demand for the tropical oil.

Oil in New York rose to its highest ever of $145.85 a barrel yesterday and traded above $145 today. Demand for crude palm oil and its main substitute soybean oil has increased as the use of vegetable oils for bio-diesel feedstock has cut availability for cooking. Soybean reached a record $16.31 a bushel yesterday on U.S. Midwest floods.

``Crude oil and soybean markets are supporting the palm oil market,'' Kan Heen Sing, trader at HLG Futures Sdn.

Palm oil for June delivery traded at 3,618 ringgit ($1,107) a ton on the Malaysia Derivatives Exchange at the midday break. Futures rallied to 3,647 ringgit yesterday, the highest since June 18. The price has risen 19 percent this year.

Still, palm oil has lagged behind gains in soybean oil, the main substitute for cooking and biofuels, Kan said. Soybean oil traded in Chicago is up 81 percent this year, faster than the 51 percent advance in crude oil.

Soybean oil prices traded at 37 percent premium to the palm oil prices today, widening from 25 percent at the end of May, according to Bloomberg data.

``There's rumor that Malaysia palm oil stockpiles may hit 2 million tons last month,'' Kan said.

Stockpiles of palm oil in Malaysia rose 6.9 percent to 1.91 million metric tons in May from April as production expanded and exports slowed, the Malaysian Palm Oil Board said June 10. That's the most since the February record of 1.93 million tons. The June stockpile is scheduled to be announced July 10.

To contact the reporter for this story: Feiwen Rong in Singapore at frong2@bloomberg.net