Palm Oil Gains on Crude as Indonesia, Malaysia Signal Changes

By Claire Leow and Yoga Rusmana

Oct. 13 (Bloomberg) -- Palm oil futures rebounded on a rally in crude oil and as Indonesia and Malaysia, the biggest producers, signaled changes to export policies.

Palm oil, used mainly for cooking, tracks crude as analysts consider it viable as biofuel when oil trades above $80 a barrel. Crude jumped as much as 5.1 percent, the first increase in four days, and traded at $81.20 a barrel at 4:36 p.m. in Singapore.

Indonesia, the largest producer, may cut its export tax as part of a revision of its duty system after prices plunged more than 50 percent in the past six months, Agriculture Minister Anton Apriyantono said in an interview today. Malaysia increased the amount of unprocessed palm oil that may be exported.

``Any effort to boost exports is helpful in the short term'' as reduced inventory supports prices, Ben Santoso, a plantation analyst at DBSVickers Securities (Singapore), said by e-mail today.

Palm oil for December delivery gained as much as 2.9 percent to 1,824 ringgit ($521) a metric ton on the Malaysia Derivatives Exchange, just above the lowest price for the most active contract in almost two years. The contract traded at 1,813 ringgit at 4:41 p.m. in Singapore. Futures have lost 60 percent from their March peak.

The Indonesian government is seeking ways to help farmers cope with the plunge in commodity prices before parliamentary and presidential elections next year.

Indonesia will make it mandatory to mix biofuel with gasoline and diesel starting in October, Energy Minister Purnomo Yusgiantoro said Sept. 26. Diesel used for transportation must have at least 1 percent biofuel content, while the minimum amount for industrial use is 2.5 percent.

Malaysia is raising the limit on the amount of unprocessed palm oil that may be exported in a bid to cut rising stockpiles and boost prices, Plantation Industries and Commodities Minister Peter Chin Fah Kui said today. The government boosted the ceiling by 50 percent to 3 million tons.

Palm oil inventories in Malaysia gained 5.5 percent to 1.95 million tons in September, the third-highest on record.

``Palm oil stocks are building up,'' Chin told reporters outside Kuala Lumpur. ``That is our overall worry.''

To contact the reporters on this story: Claire Leow in Singapore at cleow@bloomberg.net; Yoga Rusmana in Jakarta at bbjakarta@bloomberg.net.