(July 17): Palm oil headed for a second weekly advance on expectations for stronger demand from India, and a lift from higher crude prices.
Futures traded near RM4,590 a tonne in Kuala Lumpur, up about 1% for the week, though little changed from the previous session.
“Upcoming demand from India for festival season and El Niño concerns are seen underpinning prices,” said Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental Ltd, referring to the hot and dry weather pattern that is expected to weigh on production later this year.
Edible oil consumption in the South Asian nation typically gets a boost during the festival season, which starts in August and peaks in November with Deepawali, the Hindu festival of lights.
India’s planted area for oilseeds, as of early July, was a fifth below last year, according to data from the agriculture ministry, published this week. Lower domestic production could increase the country’s reliance on edible oil imports in the coming months, Thiagarajan said.
Meanwhile, renewed hostilities between the US and Iran have boosted crude oil prices once again, making biofuels an attractive alternative. Palm oil is a key feedstock for biofuels. The vegetable oil has flipped to a discount of around US$53 (RM216.30) per tonne to gasoil.
Still, ample output and stockpiles in the biggest growers Indonesia and Malaysia may lift exports for now, keeping prices in a range, analysts said.
Prices
- Palm oil for October delivery on Bursa Malaysia Derivatives fell 0.3% to RM4,591/tonne as of 1.55pm local time; up 15% year to date
- Soybean oil for December in Chicago rises 0.8% to 71.10c/lb
- Refined palm oil for September on Dalian Commodity Exchange fell 0.2% to 9,239 yuan (RM5,566.93)/tonne
- Dalian soybean oil for September fell 0.5% to 8,539 yuan/tonne
- Soybean oil’s premium over palm stood at about US$443.20/tonne versus an average of about US$234 in the past year, according to data compiled by Bloomberg
- Palm’s discount to gasoil stood at about US$53.40/tonne versus an average premium of about US$213 in the past year, according to data compiled by Bloomberg
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