Palm Oil Gains as Surging Indian Demand Seen Cutting Inventories

Palm oil advanced on speculation that reserves in Malaysia may drop from a record as India, the world’s largest importer, boosts purchases to meet a shortfall.

The contract for delivery in April gained 0.8 percent to 2,566 ringgit ($828) a metric ton by the 12:30 p.m. mid-day break on the Malaysia Derivatives Exchange in Kuala Lumpur. Futures have gained 5.3 percent this year.

India’s purchases of cooking oils surged 74 percent to a record 1.15 million tons in January from 659,979 tons a year earlier, according to the median of estimates from five processors and brokers compiled by Bloomberg. Imports of crude and refined palm oils jumped 76 percent to 900,000 tons, the survey showed. The Solvent Extractors’ Association of India will publish data next week.

“India being a price-sensitive market, it will always look for cheaper alternatives,” Prathamesh Mallya, an analyst at AnandRathi Commodities Ltd., said from Mumbai. “Malaysian exports may gain as the zero-export duty would attract Indian buyers. That would probably remove inventories from Malaysia.”

Stockpiles of the oil used in food and biofuels fell 3.8 percent to 2.53 million tons in January from an all-time high of 2.63 million tons a month earlier, according to a Bloomberg survey published yesterday. The Malaysian Palm Oil Board is due to release the data on Feb. 13.

Malaysia, the largest producer after Indonesia, will allow crude palm oil exports at zero duty for a third month in March if prices remain below a threshold of 2,250 ringgit a ton, Plantation Industries and Commodities Minister Bernard Dompok said Feb. 4. The country set the tariff at zero in January and extended it to February to clear the reserves.

Refined palm oil for delivery in September was little changed at 7,130 yuan ($1,143) a ton on the Dalian Commodity Exchange. Soybean oil for delivery in the same month dropped 0.5 percent to 8,768 yuan a ton.

Soybeans for March delivery declined 0.3 percent $14.8375 a bushel on the Chicago Board of Trade, while soybean oil for March delivery lost 0.3 percent to 52.31 cents a pound. Soybean oil costs about 1.39 times the price of 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

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