10/03/2011 (Bloomberg) - Palm oil closed little changed on speculation that rising soyabean oil supplies from Argentina and Brazil may cool demand for the tropical commodity.

The May-delivery contract gained as much as 1 percent and declined as much as 0.8 percent before closing little changed at 3,585 ringgit ($1,182) a metric ton on the Malaysia Derivatives Exchange. Futures slumped 3 percent yesterday.

“The market is under pressure as soybean arrivals have started in Brazil and Argentina,” Prasoon Mathur, an analyst at Religare Commodities Ltd. said by phone from New Delhi. “Demand from main palm oil consumers such as India is also low because of satisfactory local supplies.”

India, the biggest palm oil buyer, may trim purchases this year as the nation’s cooking oil output increases, Dorab Mistry, director of Godrej International Ltd., told a conference today.

Palm oil may test the 4,000 ringgit mark in the next few weeks on high energy prices, tight stockpiles and pent-up demand, Mistry said in Kuala Lumpur.

“I expect current high prices to remain intact for the next 8 to 10 weeks and during that time to test new highs,” he said. A “sharp correction would not be unexpected” around May or June, followed by a “strong recovery” from August, when palm oil may trade from 3,600 to 4,000 ringgit, Mistry said.

Futures have lost 9.6 percent after reaching a 35-month high of 3,967 ringgit on Feb. 10. Prices reached a record 4,486 ringgit in March 2008.

Output, Inventories

Palm oil may decline from May or June as production and stockpiles recover, Thomas Mielke, executive director of Oil World, said at the conference. Futures may average 2,850 ringgit in October to December this year, he said. Prices have averaged about 3,730 ringgit this year, according to Bloomberg data.

Soyabean oil may trade at about 70 cents a pound, from about 58 cents today, and its premium over palm will widen to a record $200 a ton “as winter sets in,” said Godrej’s Mistry. Palm oil tends to cloud over in winter, stoking demand for soybean oil.

“This is going to be a year of high volatility and high excitement,” Mistry said. “We must be prepared for volatility like we have never been experienced before.”

Soybean oil for May delivery fell as much as 0.6 percent to 58.11 cents on the Chicago Board of Trade and was at 58.38 cents at 6:27 p.m. in Singapore. May-delivery soybeans shed as much as 0.5 percent to $13.75 a bushel.

Palm and soyabean oils are substitutes in food and fuel uses, and prices can be influenced by shifts in energy costs.

Biofuel Demand
Biodiesel demand is expected to grow by 2.5 million tons globally this year, while output in the U.S. may rise to 3.3 million tons in 2011, from 1 million tons, Mistry said.

Oil dropped for a second day as members of the Organization of Petroleum Exporting Countries considered talks about raising production as fighting disrupts supplies from Libya. Oil, which has risen 28 percent in the past year, dropped as much as 0.8 percent to $104.21 a barrel today.

September-delivery palm oil on the Dalian Commodity Exchange fell 1.1 percent to close at 9,388 yuan ($1,429) a ton and soyabean oil for delivery in the same month shed 0.7 percent to 10,180 yuan.

CME Group Inc.’s most-active June palm-oil contract, pegged to the Malaysian benchmark price, shed as much as 1.1 percent to $1,166.25 a ton.