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Palm Oil Drops as Decline in Crude Oil Reduces Biofuel Appeal

Palm oil retreated from a five-week high as investors sold commodities including crude oil, reducing the appeal of vegetable oils as biofuel feedstock.

The contract for November delivery declined 0.2 percent to close at 2,329 ringgit ($708) a metric ton on the Bursa Malaysia Derivatives. 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, according to data compiled by Bloomberg.

Commodities from soybeans to crude fell with stocks and emerging-market currencies on speculation that a U.S. recovery will prompt the Federal Reserve to pare its quantitative-easing program. West Texas Intermediate oil for September delivery dropped 0.4 percent to $106.63 a barrel on the New York Mercantile Exchange. A record 5.6 million tons of palm was used for fuel in 2012, according to Hamburg-based research company Oil World.

“The expectation of the tapering of QE may have shifted asset allocation back to safe-haven assets,” Alan Lim Seong Chun, an analyst at Kenanga Investment Bank Bhd., said in Kuala Lumpur. “We are seeing some weakening of crude oil prices, which will then translate into lower demand for biofuels.”

Soybean oil for delivery in December fell 1.2 percent to 43.26 cents a pound on the Chicago Board of Trade. Soybeans for November lost 1.4 percent to $12.8525 a bushel, after gaining 3.5 percent yesterday.

Malaysian Exports

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. Shipments gained 12 percent in the same period, according to SGS (Malaysia) Sdn.

A decline in India’s currency to an all-time low may fail to deter refiners and traders from importing a record amount of cooking oils this year as the commodity is seen as an essential, according to the Solvent Extractors’ Association of India. The rupee tumbled past 64 per dollar today for the first time.

Refined palm oil for January delivery declined 1.7 percent to close at 5,540 yuan ($905) a ton on the Dalian Commodity Exchange. Soybean oil lost 1.4 percent to 7,134 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

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