Palm-Oil Prices Boosted by Brent Rise as Biodiesel Demand Seen: Dow Jones Palm-oil prices are on a run this week after the crisis in Ukraine escalated--encouraging gains as trade participants bet on higher biodiesel demand after crude-oil prices climbed 2% Monday. Even before Ukraine crude palm oil prices were hitting fresh one-and-a-half year highs thanks to very dry weather in the main producing regions of Indonesia and Malaysia. A drought in Brazil means uncertainty about soybean production this year sending prices of soyoil--a palm oil competitor--soaring. BMD palm oil futures gained 9.4% in February--months after hitting a three-year-low in July. On Tuesday BMD crude palm-oil prices were 7 Malaysian ringgit higher at 2,813 ringgit a metric ton. Now, concern over palm-oil production is adding to worries about oil supply in Europe because Ukraine is an important transit country for Russian oil and gas to eastern Europe. As oil prices climb, palm-oil analysts and traders say consumer demand for biodiesel may pick up even with high palm oil prices--because biodiesel blended with palm oil may become more competitively. Prices are also driven by soy-bean price uncertainty because of the drought in Brazil as well as an increased demand for biodiesel as Brent-oil prices are boosted by the Ukraine crisis making a palm-oil biodiesel blend attractively priced in comparison, Kenangas senior research analyst Alan Lim said. There may be a short-term spike in substitution with biodiesel, Oiltek director Yong Khai Weng said. Oiltek supplies machinery for biodiesel production. Biodiesel demand has been growing in the past year in Indonesia and Malaysia because of government commitments, he said. An increased demand in discretionary biodiesel consumption may come at a time when large palm oil producers Indonesia and Malaysia are boosting local consumption of the fuel by mandating higher requirements of palm oil in biodiesel. Indonesia will likely export the same amount of palm oil this year even though domestic consumption will rise 38%, Indonesia Palm Oil Association executive director Fadhil Hasan said on the sidelines of a conference in Kuala Lumpur. Indonesia and Malaysia account for about 90% of world-wide palm oil production.
Posted on: Tue, 04 Mar 2014 09:00:00 +0000
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