BLBG:Palm Oil Drops as Decline in Crude Oil Reduces Biofuel Appeal
Palm oil retreated from a five-week high as crude oil fell, reducing the appeal of vegetable oils as biofuel feedstock.
The contract for November delivery declined as much as 0.9 percent to 2,311 ringgit ($700) a metric ton on the Bursa Malaysia Derivatives, and ended the morning session at 2,317 ringgit. Futures yesterday closed at the highest price for the most-active contract since July 11. Palm for physical delivery in September was at 2,400 ringgit yesterday, according to data compiled by Bloomberg.
Asian stocks fell for a fourth day and currencies from India to Malaysia and Thailand weakened on speculation a strengthening U.S. economy may prompt the Federal Reserve to pare its $85 billion monthly bond buying, part of its quantitative easing policy. West Texas Intermediate oil for September delivery dropped 0.2 percent to $106.89 a barrel on the New York Mercantile Exchange. A record 5.6 million tons of palm was used for fuel in 2012, according to Oil World, a Hamburg-based research company.
“The expectation of the tapering of QE may have shifted asset allocation back to safe haven assets such as the U.S. dollar,” Alan Lim Seong Chun, an analyst at Kenanga Investment Bank Bhd., said by phone in Kuala Lumpur. “That means short-term low demand for risky assets, which include crude oil. We are seeing some weakening of crude oil prices, which will then translate into lower demand for biofuels.”
Exports Climb
Palm oil exports from Malaysia, the world’s second-largest producer, climbed 10 percent to 880,979 tons in the first 20 days of this month from the same period in July, surveyor Intertek said today.
Soybean oil for delivery in December fell 1.1 percent to 43.28 cents a pound on the Chicago Board of Trade. Soybeans for November lost 0.9 percent to $12.9175 a bushel, after gaining 3.5 percent yesterday on concerns warm, dry weather in the U.S. will hurt crops in the world’s largest exporter.
Refined palm oil for January delivery declined 0.9 percent to 5,582 yuan ($912) a ton on the Dalian Commodity Exchange. Soybean oil prices dropped 0.8 percent to 7,174 yuan a ton.
To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net
To contact the editor responsible for this story: Jake Lloyd-Smith at jlloydsmith@bloomberg.net
