Palm Oil Gains as Crude Oil Rallies, Boosting Demand Prospect

By Jae Hur

April 16 (Bloomberg) -- Palm-oil futures in Malaysia gained, supported by crude oil’s first increase in a week, which raised demand prospects for the vegetable oil as a source of biofuel.

Crude oil advanced as much as 2.1 percent today as equities in the U.S. rallied and the Federal Reserve said the economies of some U.S. districts had slowed the pace of their decline. Soybean futures jumped to a three-month high and soybean oil, a rival to palm oil, climbed close to its highest level since Jan. 12 on the Chicago Board of Trade today.

“Crude oil is the only factor I can find now which supports palm oil prices,” said Merlissa Paramitha Trisno, an analyst at PT Mandiri Sekuritas in Jakarta.

June-delivery palm oil on the Malaysia Derivatives Exchange gained as much as 1.3 percent to 2,491 ringgit ($694) a metric ton and traded at 2,472 ringgit at 12:48 p.m. local time. The contract climbed to 2,540 ringgit yesterday, the highest intra- day level since Sept. 3.

The 14-day relative strength index for palm-oil futures, a gauge of momentum, has been above 70 since April 9, signaling prices may decline after a five-month winning streak.

The rally has narrowed the premium of soybean oil over palm oil to 17.7 percent, the lowest since May 1, compared with a six-month average of 48 percent, according to data compiled by Bloomberg. Palm oil remains the world’s cheapest vegetable oil.

Stockpiles down

Palm oil in Dalian for September delivery rose 2.5 percent to 6,478 yuan ($948) a ton, a 13 percent surge in the last six days. Soybean oil in Chicago for May delivery was little changed at 36.93 cents per pound at 12:51 p.m. Singapore time after touching 37.27 cents yesterday, the highest since Jan. 12.

Stockpiles of palm oil in Malaysia, the world’s second- largest producer, fell 13 percent to 1.36 million tons in March, the lowest since July 2007, the palm-oil board said April 10.

Malaysia’s palm-oil exports increased in the first 15 days of April to 613,677 tons, up 3.7 percent from the previous month, independent surveyor Intertek said yesterday.

India, the world’s second-largest buyer of vegetable oils after China, bought 641,141 tons in March, a 28 percent increase from last year, the Solvent Extractors’ Association of India said yesterday. Imports in the five months ended March 31 climbed 59 percent to 3.6 million tons from a year earlier.

To contact the reporter for this story: Jae Hur in Singapore at jhur1@bloomberg.net