Palmoil HQ Crude Palm Oil Futures Advance for Third Day on Speculation of European Demand

February 4, 2009 14:03 GMT+8

Crude palm oil futures rose for a third day in Kuala Lumpur on speculation that increased European demand for the vegetable oil may offset the prospect of slowing sales in China.

“Although demand from China could potentially slow down because of the recession, we gather that demand from Europe has been picking up,” Gan Huey Ling at AMResearch Sdn. wrote in a report. “We believe this could be due to the low prices.”

Palm oil for April delivery rose as much as 2.4 percent to 1,830 ringgit ($506) a metric ton on the Malaysia Derivatives Exchange, the highest intraday price since Jan. 23, when it touched 1,879 ringgit. The contract was at 1,830 ringgit at the 12:30 p.m. break.

Exports of Malaysian palm oil to China in December dropped to 322.2 million tons from 332.2 million in November, while shipments to Europe rose to 319.7 million tons from 256 million, according to independent cargo surveyor Societe Generale de Surveillance.

“Things in the plantation sector are not all that bleak,” wrote Gan, an AMResearch analyst. Kuala Lumpur Kepong Bhd., a Malaysian palm-oil producer, gained 0.5 percent to 10 ringgit, taking its advance since Jan. 23 to 5.3 percent. Sime Darby Bhd., the world’s palm oil producer, was unchanged at 5.4 ringgit.

Purchase Plan

KL Kepong, as the company is called, is “bullish” on prices and may buy planted land to expand, Chief Executive Officer Lee Oi Hian said today in an interview in Kuala Lumpur. Sime expects prices to rise this year, Chief Executive Officer Ahmad Zubir Murshid said in December, according to the Edge newspaper.

Palm oil, used mainly in cooking, is a substitute for soybean oil, which is produced mainly in the U.S., Argentina and Brazil. Soybean oil for March delivery in Chicago traded at 32.01 cents a pound at 11:21 a.m. Singapore time, making it about 40 percent more expensive than palm oil.

Soybean oil rose after Meterologix LLC said Feb. 2 that more rain was needed to support the filling of soybean pods this month in the main growing regions of Argentina. The harvest in Argentina, the largest exporter of soybean oil, may drop 25 percent this year because of drought, Ricardo Forbes, president of the Buenos Aires Cereals Exchange, said last month.