Palmoil HQ Palm oil futures jump 2% on crude gains

Malaysian palm oil futures climbed nearly 2 per cent yesterday, lifted by strengthening crude oil prices although expectations of a rebound in production this month capped gains.

The benchmark August contract on Bursa Malaysia’s Derivatives Exchange closed up RM47, or 1.9 per cent, to RM2,552 (US$731) per tonne. Overall volume climbed to 16,098 lots of 25 tonnes each from the usual 10,000 lots.

But the market was off its intraday high of RM2,585 a tonne on fears of rising supplies.
“The market shot up because of the gains in crude oil and soybean oil,” said one Kuala Lumpur-based trader.

“But it remains to be seen whether the market can sustain these levels or not as supplies are gradually rising.

” Malaysian palm oil may hit the US$830 level by year-end on the back of a stronger crude oil price and China’s stockpiling of oilseeds, top industry analyst James Fry said yesterday.

“If you believe that energy prices will go on rising to US$70 per barrel in six months’ time, CPO prices will reach US$830 by year end,” Fry, who is chairman of London-based commodities consultancy LMC International, told a conference Jakarta.

But some traders doubted his estimate as demand for the tropical oil is expected to slide after festival season in leading importer India ends in October.

“We will have good exports up to September or October, after that it will get very quiet and only production will rise,” said another trader.

Palm oil has surged 51 per cent this year on declining production earlier in the year and robust demand. Rival soybean oil risen slightly more than 14 per cent on the benchmark Chicago Board of Trade.

Oil rose above US$65 a barrel yesterday, on track for its largest monthly percentage gain in more than a decade, after Japanese and US data suggested the economic downturn may be moderating.

Palm stocks in the world’s No.2 producer of the vegetable oil dropped 5.37 per cent to 1.29 million tonnes in April — which is nearly 8 per cent below the 1.4 million tonnes needed for palm industry to operate normally.