June 16 (Bloomberg) -- Palm oil gained as crude oil extended a rally, boosting the appeal of the vegetable oil as a source of alternative fuel.
Palm oil for August delivery advanced 1 percent to 2,415 ringgit ($742) a metric ton on the Malaysia Derivatives Exchange at the 12:30 p.m. trading break. Crude oil in New York for July delivery climbed as much as 0.3 percent to $77.19 a barrel, extending yesterday’s 2.4 percent rise, and traded at $77.01 at 1:01 p.m. Singapore time. Vegetable oils tend to track crude oil as they can be used to produce biofuels.
Still, analysts said palm oil’s fundamentals do not favor further gains.
“I don’t think there will be much excitement for palm oil” and it’s “likely to stay range-bound between 2,400 and 2,600 ringgit over the next couple of months,” said Arhnue Tan, a senior analyst at ECM Libra Capital Sdn.
Soybeans on the Chicago Board of Trade for November delivery gained 0.5 percent to $9.2025 a bushel, while soybean oil for December delivery gained for a fourth day, rising 0.3 percent to 39 cents a pound. Soybean oil’s premium over palm oil jumped to $118.06 a ton, from $85.20 at the end of last week, according to Bloomberg data.
The outlook for palm oil is poor because “beans could head towards $8.50 to $8.75 through the second half,” although disruptions caused by the weather may contribute to a speculative rally, said Scott Briggs, a agricultural commodities strategist at Australia & New Zealand Banking Group Ltd.
CME Group Inc.’s September-delivery palm oil contract, which is pegged to the Malaysian benchmark price, was little changed at $730.75 a ton. The Dalian Commodity Exchange is closed for a public holiday and reopens tomorrow.
To contact the reporter on this story: Claire Leow in Singapore at cleow@bloomberg.net
