Palm Oil Rises on Rally in Crude, Soybean Oil, Dollar Decline

By Feiwen Rong and Glenys Sim

Nov. 10 (Bloomberg) -- Palm oil futures in Malaysia rose for the second day, tracking gains in crude oil and rival soybean oil after China said it will spend 4 trillion yuan ($586 billion) through 2010 to stimulate growth.

Crude jumped more than $3 a barrel on speculation the funds may help sustain demand for the fuel in China, the world's second largest oil consumer. The edible oil, used mainly in food, tracks crude oil as analysts consider it viable for use as a biofuel.

``Palm oil's rally is a combination of gains in crude and soybean oil, an improved demand outlook from China and the dollar's decline,'' Kan Heen Sing, trader at HLG Futures Sdn., said by phone from Kuala Lumpur today.

Palm oil for January delivery rose as much as 5.4 percent to 1,696 ringgit ($479) a ton on the Malaysia Derivatives Exchange, before ending the day at 1,626 ringgit. It touched a three-year low of 1,331 ringgit a ton on Oct. 28, falling 70 percent from its March record.

The funds, equivalent to almost a fifth of China's gross domestic product last year, will be used by the end of 2010, the Beijing-based State Council said yesterday on its Web site.

Finance ministers from the Group of 20 nations, of which China is a member, issued a joint statement after a weekend meeting in Sao Paulo saying they are ready to act ``urgently'' to tackle the economic slump.

Oil in New York gained for a second day, trading at $63.61 a barrel at 6:07 p.m. in Singapore, while soybean oil for December delivery in Chicago advanced 3 percent to 34.90 cents a pound.

Physical Market

In the physical market, Indonesia's state marketing center accepted bids for 6,000 tons of 8,500 tons of palm oil offered in a tender today, said Aziz Kahar, head of sales in Jakarta.

The center sold 1,000 tons ex-factory Medan and 3,000 tons from Belawan port in North Sumatra province to PT Multimas Nabati Asahan at 5,053 rupiah a kilogram ($453 a ton), he said.

PT Bukit Kapur Reksa bought 1,000 tons from Siak port in Riau province at 4,973 rupiah per kilogram and 1,000 tons from Tayan port in West Kalimantan at 4,813 rupiah.

To contact the reporters on this story: Feiwen Rong in Singapore at frong2@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net