Malaysian palm oil futures hit more than two-week highs on Friday as higher prices of competing crude oil and soyoil markets may kick in more fuel and food demand for the tropical oil. Traders are expecting Malaysian palm oil exports for the first ten days of April to rise about 7 percent to above 380,000 tonnes from a month ago.
Higher demand comes at time when palm oil supplies are rising in Malaysia. Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance will issue the export data on Monday while industry regulator Malaysian Palm Oil Board will release key March stocks and production figures. "Palm oil followed strong crude oil that hit $124," said a trader with Kuala Lumpur-based foreign brokerage. "The vegetable oil is now massively discounted against soyoil, so there might be a follow through the next week."
The benchmark June crude palm oil contract on Bursa Malaysia Derivatives settled up 2.1 percent or 71 ringgit to 3,399 ringgit ($1,122) per tonne, after going as high as 3,400 ringgit - a level unseen since March 22.
Overall traded volume more than doubled to 32,390 lots of 25 tonnes each, above the usual 15,000 lots. US soyoil for May delivery rose 1.4 percent in late Asian hours and the most active January 2012 soyoil contact in China's Dalian Commodity Exchange climbed 0.9 percent. High soyoil prices, now at a premium of over $200 to palm oil, may prompt buyer to switch to the tropical oil at a time when the market expects production in Malaysia to rebound strongly after two years of weak yields.
"If the spread gets wider, we'll see demand coming in from India and China," said the same trader. Oil surged to a 32-month high of $124 in Asian hours as the prospect of long-term supply cuts stemming from attacks on oilfields in Libya offset demand concerns spurred by a major aftershock in Japan. Although palm oil can be a feedstock for biodiesel, it is more likely to be used to fill the gaps left behind by soyoil and rapeseed oil that are increasingly used in the energy sector.