Jakarta: Sharp rise in crude oil prices has raised expectations of stronger demand for biodiesel feedstocks resulting in Malaysian palm oil futures recording their biggest rise in three years on Monday, Reuters reported.
The benchmark May contract on the Bursa Malaysia Derivatives Exchange climbed 203 ringgit, or 4.65 per cent, to close at 4,570 ringgit (about $1,154) per tonne. During the trading session, prices had surged more than 9 per cent, touching 4,803 ringgit per tonne, the highest level in over a year.
Market analysts said the rally was largely driven by the sharp rise in energy prices and gains in other vegetable oils. Anilkumar Bagani, research head at Sunvin Group in Mumbai, said palm oil futures moved sharply higher as energy markets rallied and competing vegetable oils also gained.
Crude oil prices rose above $119 a barrel on Monday, reaching levels not seen since mid-2022. The increase came as major producers cut supplies and concerns grew about shipping disruptions due to the widening conflict involving the United States, Israel and Iran. Higher crude prices make palm oil more attractive as a raw material for biodiesel.
Industry officials told Reuters that rising oil prices and higher freight rates linked to the Middle East tensions could increase demand for palm oil from biodiesel producers and food buyers in Asia seeking immediate shipments.
Other edible oil markets also recorded gains. The most-active soy oil contract on the Dalian Commodity Exchange rose 3.16 per cent, while its palm oil contract gained 6.25 per cent. Soy oil futures on the Chicago Board of Trade climbed 2.34 per cent.
Palm oil prices often follow the trend in other edible oils because they compete in the global vegetable oil market.Meanwhile, Indonesia may revive its plan to introduce a mandatory B50 blend of palm oil-based biodiesel later this year. Deputy energy minister Yuliot Tanjung said the proposal is being reconsidered following the recent surge in crude oil prices linked to tensions in the Middle East
