Palm Oil Gains Most in Seven Months as Discount Attracts Buyers

By Claire Leow

Oct. 30 (Bloomberg) -- Palm oil futures in Malaysia gained the most since March after a 28 percent plunge in the past month widened the gap with soybean oil and crude oil, luring buyers.

``Palm oil's discount to soybean oil is now $380,'' said analyst Tan Ting Min of Credit Suisse in Kuala Lumpur. The ``huge discount should encourage a demand shift to palm oil from more expensive vegetable oils. Bio-diesel demand has increased as palm oil prices have fallen more than crude oil.''

Palm oil for January delivery gained as much 104 ringgit, or 7.3 percent, to 1,539 ringgit ($434) a metric ton on the Malaysia Derivatives Exchange, the biggest intra-day gain since March 10. The contract traded at 1,505 ringgit at 12:09 p.m., after slumping to the lowest since August 2005 this week on concern the global lending crisis may slash demand.

The gains followed increases in both soybean oil and crude oil. Crude oil for December delivery gained as much as 3.4 percent to $69.80 a barrel, extending yesterday's 7.6 percent gain in New York, the most since June 6. It traded at $69.74 a barrel at 12:10 p.m. Singapore time and is down 31 percent in the past month.

Soybean oil for December delivery advanced as much as 2.6 percent to 35.23 cents a pound, extending yesterday's 7.7 percent gain on the Chicago Board of Trade, the most since February 2005. It traded at 34.87 cents at 12:10 p.m. Singapore time. At yesterday's close, the commodity had an 89 percent premium to palm oil, a record for this year, according to Bloomberg data.

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