Palm gains on Chicago's crude oil and soyoil rally
Malaysian palm futures rose on Monday for the third consecutive session, following gains in Chicago soyoil, after the U.S. proposed increased biofuels blend, and supported by crude oil rally, following tensions in Middle East.
By midday, the benchmark palm oil contract on Bursa Malaysia's Derivatives exchange for September delivery had gained 156 Ringgit or 3.98% to 4,078 Ringgit ($961.79) per metric ton.
The U.S. administration of President Donald Trump proposed on Friday that oil refiners increase the amount biofuels they must mix into the nation's gasoline over the next two-year period. This was prompted by an increase in biomass-based fuel mandates which pushed up soyoil's price.
Investors reacted to the increased risk of conflict between Israel & Iran by buying edible oils. "Fears of supply disruptions lead to heightened risks premiums", said Darren Lim at Phillip Nova, a Singapore-based brokerage.
Palm oil production costs are increasing as a result of the increase in energy prices. He said that the biofuels sector is a good alternative to fuels derived from crude oil.
Chicago Board of Trade Soyoil gained 4.51%. Dalian's soyoil contract with the highest volume was up 2.57 %, while palm oil rose by 3.76%.
As palm oil competes to gain a share in the global vegetable oils industry, it tracks the price fluctuations of competing edible oils.
The oil prices fluctuated on Monday, after a 7% increase on Friday. This was due to renewed strikes by Israel over the weekend. There were fears that this battle could spread across the Middle East and disrupt the oil exports.
Palm oil is a better option as a biodiesel feedstock because crude oil futures are stronger.
Intertek Testing Services, a cargo surveyor, said that exports of Malaysian products containing palm oil for the period June 1-15 increased by 26.3%, to 662 580 metric tonnes, from 524,596 tons during the period May 1-15.
According to Wang Tao, a technical analyst, palm oil is still aiming for a range between 3,962 and 3,998 ringgit. It has already almost broken through the resistance of 3,927 ringgit metric ton.
(source: Reuters)
