Jan. 23 (Bloomberg) -- Palm oil advanced to the highest level in three weeks on speculation that a rally in soybean oil will boost demand for the cheaper alternative and drain record reserves in Malaysia.
The contract for delivery in April climbed 0.7 percent to 2,481 ringgit ($816) a metric ton on the Malaysia Derivatives Exchange, the highest closing price for the most-active contract since Jan. 2. Futures gained 1.8 percent this year. Financial markets in Malaysia are closed tomorrow for a holiday.
Soybean production risk continues to be “significant” because of extreme weather conditions in parts of Brazil and Argentina, the biggest growers behind the U.S., Oil World said in a report yesterday. While the two edible oils are substitutes, palm oil is cheaper. Inventories in Malaysia reached an all-time high of 2.63 million tons last month.
“There’s some concern that the weather in South America is not so good for soybean production,” Alan Lim Seong Chun, an analyst at Kenanga Investment Bank Bhd., said by phone in Kuala Lumpur. “That may lead to more substitution from soybean oil to crude palm oil in the next two to three months.”
Soybean oil’s premium over palm was $339.97 a ton today, up from $298.42 at the end of last year, data compiled by Bloomberg show. Soybean oil for March delivery headed for a seventh day of gains, rising 0.1 percent to 52.47 cents a pound.
Refined palm oil for delivery in September closed little changed at 7,134 yuan ($1,147) a ton on the Dalian Commodity Exchange. Soybean oil for delivery in the same month ended unchanged at 8,848 yuan a ton.
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