BLBG:Palm Oil Advances as Discount to Soybean Oil Boosts Demand
Palm oil gained for the first time in three days as its discount to soybean oil, a substitute in food and fuel, and prices at a two-week low boosted demand.
The contract for April delivery climbed as much as 1 percent to 2,521 ringgit ($814) a metric ton on the Malaysia Derivatives Exchange, before trading at 2,520 ringgit at 12:22 p.m. in Kuala Lumpur. That’s paring what will likely be a weekly decline after closing at 2,495 ringgit yesterday, the lowest price for most-active futures since Jan. 29.
Prices may strengthen in the first half of this year as stockpiles in Malaysia, the largest producer after Indonesia, may shrink to about 2 million tons on seasonally lower production, export tax changes and a wide discount to soybean oil, Ong Chee Ting and Chai Li Shin, analysts at Maybank Investment Bank Bhd., wrote in a report today. Soybean oil’s premium over palm was at $335.43 a ton today, compared with a five-year average of $182.46, data compiled by Bloomberg show.
“With this difference, even if soybean oil falls, palm has limited downside,” Vijay Mehta, a director at Commodity Links Pte, said by phone from Singapore. “At these levels, the consumers are coming in to buy. Demand is there, so exports should be good” for this month, he said.
China, the biggest palm oil consumer after India, will start buying again next week after financial markets were closed this week for the Lunar New Year, said Mehta. Stockpiles may drop more, he said.
Inventories in Malaysia slid 1.9 percent to 2.58 million tons last month from December, the palm oil board said Feb. 13. Output fell 10 percent to 1.6 million tons, while exports slid 1.6 percent to 1.62 million tons. Exports from Malaysia climbed 18 percent to 673,555 tons in the first 15 days of February from the same period a month ago, surveyor Intertek said today.
Soybean oil for May delivery was little changed at 52.05 cents a pound on the Chicago Board of Trade. Soybean oil is about 1.41 times costlier than palm oil.
To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
