Palm oil prices surge as crude oil rises, boosting biodiesel prospects

Malaysian palm-oil futures jumped more than 9%, before paring gains on Monday. This was the largest jump in three years. It is expected that a rise in crude oil prices will boost demand for biodiesel feedstocks.

The benchmark May palm oil contract on the Bursa Derivatives Exchange rose 203 ringgit or 4.65% to $4,570 ringgit (1,154.04) per metric ton after surging earlier in the day to 4,803 ringsgit. This was its highest level?in over a year.

Anilkumar Bagani, the research head at Mumbai-based Sunvin Group vegetable oil broker, said that "the futures surged today to limit up for the May?contract following an outrageous rally of energy prices and competing vegetable oil."

On Monday, oil prices soared to $119 a barrel, a level?not seen in the market since mid-2022. This was due to some major producers reducing their supply and the fear of 'prolonged shipping interruptions' due the the U.S. - Israel war against Iran.

Palm oil is a better option as a biodiesel feedstock because crude oil futures are stronger.

Officials in the industry said that the Middle East conflict could increase the demand for palm oil, both for biodiesel and food purposes, and also for the biodiesel and food sector.

Dalian's most active palm oil contract rose 6.25%, while the soy oil contract gained 3.16%. Chicago Board of Trade Soy?oil gained 2.34%.

As palm oil competes to gain a share in the global vegetable oils market, it tracks the price movements of competing?edible?oils.

Yuliot Tajung, the deputy energy minister of Indonesia, said that the country may reconsider its plan to introduce a B50-grade biodiesel based on palm oil in 'the middle of this year because of the surging crude prices due to the conflict in the Middle East. $1 = 3.9600 Ringgit (Reporting and editing by Dewi Kuritawati, Harikrishnan Nair, Vijay Kishore).

(source: Reuters)