Palm Oil to Average $700/Ton as Crude Falls, LMC Says

By Claire Leow

Sept. 9 (Bloomberg) -- Palm oil will average about $700 a metric ton over the northern hemisphere winter as crude oil prices decline, according to LMC International Ltd.'s James Fry.

Crude oil may trade between $80 and $85 a barrel over the winter months, Fry, managing director at the commodity and biofuel research company, told reporters at a conference in Singapore. Oil traded at $105.24 a barrel in New York.

Palm and soybean oils, mostly used in food, often follow crude oil as they can be used as biofuels. Crude has tumbled 27 percent from its July 11 record, while the price of palm oil has almost halved from a March peak. Palm oil tends to cloud in cold weather, reducing its appeal for use in cooking and fuels.

``Crude oil should fall another $20 from here and that will keep palm oil depressed,'' Fry said. ``Palm oil has trouble making more sales because of its cold-weather properties.''

Fry's forecast is about 28 percent less than the commodity's year-to-date average of 3,344 ringgit ($970) a ton. The vegetable oil today fell 4.6 percent to close at 2,345 ringgit.

Fry wrongly predicted Sept. 23, 2007, that prices may touch 2,250 ringgit a ton by January of this year as production rose. It averaged 3,226 ringgit in January and reached a record 4,486 ringgit in March.

On April 10, he said palm's gain of 57 percent in 12 months had been ``reasonable'' as it was tracking crude prices higher. On March 13, Fry predicted the price may average 2,060 ringgit a ton for the full year.

To contact the reporter on this story: Claire Leow in Singapore at cleow@bloomberg.net