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Palm Oil Climbs to Highest Level in Three Weeks as Rival Soybean Oil Gains

Palm oil advanced to the highest level in three weeks, tracking rival soybean oil, which gained after a U.S. government report showed increased sales to China, the biggest consumer of the product.

The November-delivery contract jumped as much as 1 percent to 2,655 ringgit ($852) a metric ton, the highest intraday level since Aug. 17, and ended the morning session at 2,650 ringgit. December-delivery soybean oil yesterday jumped 2.3 percent to 41.79 cents a pound on the Chicago Board of Trade, the biggest gain for a most-active contract since Aug. 13.

“Palm oil will continue to follow soybean oil until we have clarity on the size of the U.S. crop,” said Arhnue Tan, an analyst at ECM Libra Capital Sdn. in Kuala Lumpur.

The U.S. Department of Agriculture is set to publish a report on crops Sept. 10. The soybean harvest may be 3.37 billion bushels, 1.8 percent less than the USDA’s forecast of 3.433 billion, Allendale Inc. said Sept. 3, citing a survey.

China’s state reserves bought 80,000 tons of soybean oil from the U.S. last week scheduled for delivery between October and December, said three company executives familiar with the transaction. U.S. exporters sold 40,000 tons to the Asian nation, 21,000 tons to Peru and 29,500 tons to unknown destinations, the Department of Agriculture said yesterday.

“There’s a general consensus that China will need to buy more oil in the coming months,” ECM Libra’s Tan said.

China halted shipments of soybean oil from Argentina, the largest supplier, in April because of trade disputes. The ban may be lifted soon as the nations seek a closer relationship, Ambassador to China Cesar Mayoral said in an interview on Aug. 4

Festival Demand

Palm oil has advanced 17 percent from near an eight-month low on July 7, driven by festival demand in Asia, and a stronger Malaysian currency. The rally may spur demand for soybean oil, according to Atul Chaturvedi, chief executive at Adani Wilmar Ltd., India’s second-biggest vegetable oil importer.

Soybean oil’s premium over palm oil narrowed to $65.53 a ton from $81.04 yesterday, according to Bloomberg data. Soybeans for November delivery lost 0.3 percent to $10.48 a bushel on the Chicago Board of Trade.

On the Dalian Commodity Exchange, palm oil for delivery in May climbed as much as 1 percent to 7,508 yuan ($1,104) a ton, while May-delivery soybean oil added as much as 0.9 percent to 8,328 yuan a ton.

CME Group Inc.’s December-delivery palm oil contract, which is pegged to the Malaysian benchmark, declined as much as 2.1 percent to $840.75 a ton.

To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net

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