Palm oil advanced on speculation that a rally in crude oil prices to the highest level in more than two months will boost demand for the vegetable oil as feedstock for biofuels.
The contract for March delivery rose as much as 0.7 percent to 2,649 ringgit ($804) a metric ton on the Bursa Malaysia Derivatives and ended the morning session at 2,641 ringgit. Futures increased 8.3 percent this year, set for the first annual gain since 2010.
Palm entered a bull market in November as output fell at plantations in Indonesia, the biggest supplier, and biodiesel demand increased. Prices may climb to 3,000 ringgit by March as demand increases for the commodity used in food and fuel, according to Dorab Mistry, director at Godrej International Ltd.
“When crude oil prices increase it makes it more profitable to produce biodiesel from palm,” said Alan Lim Seong Chun, an analyst at Kenanga Investment Bank.
West Texas Intermediate crude oil traded above $100 a barrel for a second day after government data showed U.S. crude stockpiles fell more than expected to the lowest level since September. Futures were at $100.28, near the highest settlement since Oct. 18.
Soybean oil for March delivery was little changed at 39.33 cents a pound on the Chicago Board of Trade. Soybeans fell 0.3 percent to $13.1075 a bushel.
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