Palm Oil Advances First Time in Three Days on Biodiesel Demand

Palm oil gained for the first time in three days, paring a weekly loss, on speculation that demand may increase for the vegetable oil as a biofuel feedstock.

The contract for August delivery climbed 0.6 percent to close at 2,439 ringgit ($783) a metric ton on the Bursa Malaysia Derivatives. Futures fell 0.7 percent this week, the first such loss since the five days ended May 3. Palm for local physical delivery in June was at 2,430 ringgit, according to data compiled by Bloomberg.

Malaysia, the world’s second-largest producer, stands to win biodiesel market share from Indonesia after the biggest palm oil grower was hit with E.U. tariffs, Sabri Ahmad, chief executive officer of Felda Global Ventures Holdings, said today. Malaysia’s exports of global biodiesel may jump to 300,000 tons this year, he said.

“Support has come from the soy complex,” said Gnanasekar Thiagarajan, a director at Commtrendz Risk Management Services Pvt. Ltd. “Some support is also being seen as there are bits and pieces of news coming on exports regarding biodiesel and the purchases for Ramadan.”

Demand typically picks up ahead of Ramadan, which falls in July this year, when Muslims break day-long fasts with communal meals, and the Eid festival in August. A record 5.6 million tons of palm was used for fuel in 2012, according to Oil World, a Hamburg-based research company.

Sabri expects palm oil prices to trade between 2,400 ringgit a ton and 2,600 ringgit from July to December. Prices will be supported by biodiesel demand, even though there are concerns about demand from India and China, the biggest consumers, as economic growth slows, he said.

Soybean oil for December delivery climbed 0.5 percent to 47.40 cents a pound on the Chicago Board of Trade, while soybeans for delivery in November climbed 0.3 percent to $13.045 a bushel.

Refined palm oil for January delivery retreated 0.9 percent to close at 6,218 yuan ($1,014) a ton on the Dalian Commodity Exchange, while soybean oil for delivery in September lost 0.2 percent to 7,408 yuan.

Before it's here, it's on the Bloomberg Terminal.