Malaysian palm oil futures surge as rising crude boosts biodiesel outlook

JAKARTA: Malaysian palm oil futures surged more than 9percent before paring some gains on Monday, the biggest jump in three years, on expectations that a rally in crude oil will boost demand for biodiesel feedstocks.

The benchmark palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange gained 203 ringgit, or 4.65percent, to 4,570 ringgit (USD1,154.04) a metric ton at the close after surging to 4,803 ringgit earlier in the day, its highest level in more than a year.

“The futures surged to limit up for May contract today following an outrageous rally in energy prices and competing vegetable oils,” said Anilkumar Bagani, research head of Mumbai-based vegetable oil broker Sunvin Group.

Oil prices surged over USD119 a barrel, hitting levels not seen since mid-2022, on Monday as some major producers cut supplies and fears of prolonged shipping disruptions gripped the market due to the expanding US-Israeli war with Iran. Stronger crude oil futures make palm a more attractive option for biodiesel feedstock.

Rising crude oil prices and higher freight rates, driven by the Middle East conflict, could boost demand for palm oil from the biodiesel sector and for food use, as Asian buyers seek prompt shipments, industry officials told Reuters.

Dalian’s most-active soy oil contract added 3.16percent, while its palm oil contract rose 6.25percent. Soy oil on the Chicago Board of Trade gained 2.34percent.

Palm oil tracks the price movement of rival edible oils as it competes for a share of the global vegetable oils market. Indonesia may revive a plan to launch a mandatory B50 grade of palm oil-based biodiesel in the middle of this year due to surging crude oil prices amid conflict in the Middle East, deputy energy minister Yuliot Tanjung said.