Palm Oil Gains as Decline to Near a 2-Year Low Attracts Buyers

By Feiwen Rong

Oct. 7 (Bloomberg) -- Palm oil futures in Malaysia advanced for the first time in five days amid expectation that demand for the vegetable oil may revive after prices tumbled to the lowest in almost two years yesterday.

Prices fell as low as 1,775 ringgit ($508) a ton yesterday, the lowest since Nov. 20, 2006, and down 60 percent from a peak 4,486 ringgit on March 4.

Palm oil for December delivery added as much as 3.1 percent to 1,877 ringgit a ton on the Malaysia Derivatives Exchange. It was at 1,861 ringitt at 12:11 a.m. local time. Futures slumped 14 percent last week, the most in almost eight years.

``Demand may rise as palm oil is now trading at historical discount of $350 a ton to soybean oil,'' the main rival product, Alvin Tai, analyst at OSK Research Bhd., said by telephone from Kuala Lumpur today. Still, ``it's hard to say whether we've reached a bottom.''

Soybean oil has lost 45 percent from record 72.69 cents a pound and was 69 percent more expensive than palm oil yesterday, close to the record 69.5 percent premium on Aug. 26, according to data on the Bloomberg. The two commodities are subsitutes.

Palm oil traded on China's Dalian Commodity Exchange fell the day's limit of 5 percent to 5,868 yuan ($858) a ton at the 11:30 a.m. local time break.

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