Palm Oil Climbs To 1-Week High On Biodiesel Hopes

KUALA LUMPUR, Feb 4 (Reuters) – Malaysian palm oil futures climbed to their highest in a week on Wednesday, tracking cues from crude markets and as investors pinned hopes that Indonesia’s plan to raise biodiesel subsidies will boost its consumption.

Indonesia’s government on Tuesday proposed a threefold increase in its biodiesel subsidies to 5,000 rupiah (40 U.S. cents) per litre from 1,500 rupiah, aimed at protecting the top producer’s fledgling biofuel industry against lower crude prices.

While the proposal still needs parliamentary backing before becoming law, analysts are optimistic that higher subsidies will make producing and consuming biodiesel more economic.

“We view this proposal as a potential game changer for the biodiesel industry in Indonesia,” said CIMB analyst Ivy Ng, who estimates that the increase will translate to a subsidy of around $350 per tonne for biodiesel producers and fuel distributors.

“The higher subsidy will significantly raise the CPO-biodiesel breakeven price level and revive biodiesel consumption.”

The benchmark April contract 1FCPOc3 gained 2.5 percent to close at 2,220 ringgit ($624) per tonne on Wednesday, with prices at their highest since Jan. 28.

Total traded volume stood at 66,186 lots of 25 tonnes, above the average 35,000 lots. Traders said the earlier jump in crude prices lifted the Malaysian palm contract which resumed trade on Wednesday. Markets were closed on Monday and Tuesday for public holidays.

“Positive commodity and energy market sentiment over the two days of Bursa Malaysia closure likely to stoke further gains in palm future prices today,” said a trader with a local commodities brokerage in Malaysia.

Oil prices rose in Tuesday U.S. trade after a tumbling dollar sent most commodities rallying, bringing crude’s four-day rise to about 19 percent – its biggest such advance since January 2009. O/R

However, prices later slipped on renewed concerns over global demand and swelling stocks, with Brent LCOc1 53 cents lower at $57.38 a barrel by 0911 GMT and U.S. crude down 88 cents to $52.17.

Lacklustre export demand to key buyers, coupled with a strong ringgit, however, may limit gains. Cargo surveyors reported that Malaysian exports of palm oil products in January dropped 15 percent from a month earlier to around 1.11 million tonnes, as shipments to Europe, China and India waned. PALM/ITS PALM/SGS

Meanwhile, the ringgit MYR=MY hit a more than three-week high of 3.546 per dollar on Wednesday, tracking rallies in oil prices and commodity currencies, and making the palm-priced feedstock more expensive for overseas buyers.

Palm, soy and crude oil prices at 1028 GMT

Contract Month
Last
Change
Low
High
Volume
MY PALM OIL FEB5
2184
+30.00
2159
2184
382
MY PALM OIL MAR5
2207
+57.00
2165
2209
2394
MY PALM OIL APR5
2200
+54.00
2156
2200
30449
CHINA PALM OLEIN MAY5
4750
+32.00
4736
4818
343794
CHINA SOYOIL MAY5
5436
+8.00
5426
5524
448740
CBOT SOY OIL MAR5
30.73
-4.10
30.56
30.99
12420
INDIA PALM OIL FEB5
442.30
-4.10
438.80
446.80
1199
INDIA SOYOIL FEB5
625.50
-8.25
623.00
635.00
25325
NYMEX CRUDE MAR5
51.30
-1.75
51.10
52.56
52419


Palm oil prices in Malaysian ringgit per tonne                                              ($1 = 3.557 Malaysian ringgit) 
CBOT soy oil in U.S. cents per pound                                              ($1 = 6.2477 Chinese yuan) 
Dalian soy oil and RBD palm olein in Chinese yuan per tonne                  ($1 = 61.71 Indian rupee)
India soy oil in Indian rupee per 10 kg
Crude in U.S. dollars per barrel

Source : Reuters

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