Vegetable Oil Prices Are Seen Near Bottom on Energy Use

Palm oil and other vegetable oils may rebound from current “very low” price levels as a recent slide prompts demand for use in energy and food, industry researcher Oil World wrote.

Low palm-oil prices in Indonesia have prompted rising use by the energy industry, while Argentina’s biodiesel exports were “unusually high” in July and the first half of August, the Hamburg-based researcher wrote in an e-mailed report.

Palm oil, soybean oil and rapeseed oil can be used as a feedstock to make biodiesel or as fuel to fire power plants. Soybean oil futures fell 24 percent in Chicago in the past 12 months, touching a five-year low of $0.331 a pound yesterday, amid an outlook for record U.S. soybean production.

“Improved buying activity is likely to create a bottom from which some moderate price recovery can occur,” Oil World wrote. “We do not see a bullish trend in vegetable oil prices but expect some recovery from current very low levels.”

Crude palm oil prices in Rotterdam fell to a 20-month low of $760 a metric ton on Aug. 14, while prices for free-on-board crude palm oil in Indonesia fell to $715 a ton, close to a four-year low, according to Oil World.

“Additional price losses in vegetable oils are very limited, in our opinion, because at these prices demand from the energy sector has picked up,” Oil World wrote.

Argentina’s biodiesel production may climb to a record 2.8 million tons this year from 2 million tons in 2013, with most output expected to be exported, the researcher wrote. Soybean oil is “virtually” the only feedstock, meaning the boost in Argentina biodiesel production will curb the country’s export supplies of the commodity.

Argentina’s export sales of biodiesel from the start of the year through to Aug. 13 were a record 1.65 million tons, according to Oil World.

The current low vegetable oil prices may also boost demand for food use, after several importing countries cut stocks of palm oil and other edible oils in the first half of 2014, Oil World wrote.

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