Palm advanced the most in almost two weeks on speculation that an increase in crude oil prices to the highest level in more than a month will boost demand for the tropical oil in biodiesel as production declines in Indonesia.
The contract for February delivery rose 1.5 percent to 2,656 ringgit ($824) a metric ton on the Bursa Malaysia Derivatives, the biggest gain for most-active futures since Nov. 21. Futures advanced 8.9 percent in 2013.
Palm oil, used in everything from candy to detergents, entered a bull market last month and is heading for its first annual gain in three years as production drops at plantations in Indonesia and biodiesel demand increases. Output in Indonesia, the biggest producer, will decline by 500,000 tons to 27.5 million tons this year, Dorab Mistry, director at Godrej International Ltd., said on Nov. 29. That’s the first drop since 1998, according to U.S. Department of Agriculture data.
“Higher crude oil prices will mean increased usage of palm in biodiesel,” said Ivy Ng, an analyst at CIMB Investment Bank Bhd., by phone from Kuala Lumpur. “Palm has generally trended down in the last few days and we are seeing some bargain buying because there are expectations that prices will rise as we head into the lower production months.”
West Texas Intermediate crude oil climbed as much as 1.6 percent to $97.53 per barrel, the highest level since Oct. 30, as U.S. inventories shrank. Palm prices were also boosted by gains in soybeans, said Ng.
Soybean oil for January delivery advanced 0.7 percent to 40.37 cents a pound on the Chicago Board of Trade. Soybeans climbed 0.2 percent to $13.225 a bushel.
Refined palm oil for May delivery gained 0.4 percent to close at 6,252 yuan ($1,026) a ton on the Dalian Commodity Exchange. Soybean oil ended little changed at 7,262 yuan.
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