Palm Drops to Six-Week Low as Crude Losses Cut Biofuel Appeal

Palm oil declined to the lowest level in more than six weeks as a fall in crude prices reduced the appeal of vegetable oils as biofuel feedstock and the pace of exports slowed from Malaysia, the second-biggest producer.

The contract for December delivery lost 1.1 percent to 2,269 ringgit ($706) a metric ton on the Bursa Malaysia Derivatives, the lowest close for futures since Aug. 12. Prices fell 5.6 percent this month after advancing the most in almost three years in August. Palm for physical delivery in October was at 2,310 ringgit, data compiled by Bloomberg show.

West Texas Intermediate for November delivery traded near the lowest level in 12 weeks after data showed an unexpected increase in U.S. reserves. Palm oil is the biggest feedstock for biodiesel after soybean oil and 6.34 million tons will probably be processed into fuel this year, 11 percent more than in 2012, according to Oil World, a research company based in Hamburg.

“Crude oil prices have been declining and taking away the incentive for using palm oil in production of biodiesel,” said Sandeep Bajoria, chief executive officer of Mumbai-based broker Sunvin Group. “Another reason for the weakness in palm oil is that the export numbers have come down.”

Shipments from Malaysia rose 6.5 percent to 1.24 million tons in the first 25 days of September from the same period a month earlier, surveyor Intertek said yesterday. That’s slower than the 13 percent growth in the first 20 days of the month.

Soybeans for delivery in November slid 0.6 percent to $13.1325 a bushel on the Chicago Board of Trade. Soybean oil for December delivery declined 0.4 percent to 41.92 cents a pound.

Refined palm oil for January delivery rose 0.1 percent to close at 5,404 yuan ($883) a ton on the Dalian Commodity Exchange. Soybean oil decreased 0.3 percent to end at 7,042 yuan.

To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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