07/09/2010 (Bloomberg) - Palm oil rose to the highest level in three weeks, erasing an earlier loss, amid speculation that increased soybean imports by China, the biggest vegetable oil user, may boost prices of rival soybean oil.

Futures for November delivery added 0.3 percent to close at 2,628 ringgit ($840) a metric ton in Kuala Lumpur, the highest level since Aug. 17. Prices jumped by the most in almost a month yesterday on speculation that supplies of U.S. soybeans may be lower than expected.

“Gains in soybean oil lent support to the palm oil market,” said Veeresh Hiremath, an analyst at Karvy Comtrade Ltd. “I expect soybeans to stay positive in the next few days because of strong demand” for U.S. beans from China, he said.

China’s state reserves bought 80,000 tons of soybean oil from the U.S. last week scheduled for delivery between October and December, said three company executives familiar with the transaction. The country will buy 55 million tons of soybeans in the year starting Oct. 1, up from an estimated record 52 million tons this year, said Frank Zhou, the general manager for soybean trading at Cargill Investment (China) Ltd. on Sept. 3.

Palm oil has advanced 16 percent from near an eight-month low on July 7, driven by festival demand in Asia, and a stronger Malaysian currency. The rally may spur demand for soybean oil, Atul Chaturvedi, chief executive at Adani Wilmar Ltd., India’s second-biggest vegetable oil importer, said in an interview.

December-delivery soybean oil rose as much as 0.7 percent to 41.14 cents a pound, widening the premium over palm oil to $61.63 a ton from $59.68 yesterday, according to Bloomberg data. Soybeans for November delivery added as much as 0.8 percent to $10.43 a bushel on the Chicago Board of Trade. The U.S. markets were closed for Labor Day holiday yesterday.

Stockpiles Increase

Palm oil fell 0.5 percent in intraday trading on concern that a drop in exports from Malaysia, the second-biggest grower, may swell stockpiles before a seasonal increase in output.

“There have been concerns about stockpiles increasing for weeks and with the production entering the peak season, it is negative for the market,” said Ryan Long, a dealer at OSK Investment Bank Bhd. in Kuala Lumpur. “There’s also a bit of profit-taking after yesterday’s big jump.”

Palm oil stockpiles in Malaysia may increase for the first time in August after exports declined, Ryan said. Shipments from Malaysia slumped 17.8 percent last month, cargo surveyor Societe Generale de Surveillance said Sept. 1. Shipments declined 13.6 percent, rival Intertek said.

The Malaysian Palm Oil Board will release the inventory and production data for August on Sept. 15.

On the Dalian Commodity Exchange, palm oil for delivery in May climbed 1.3 percent to 7,436 yuan ($1,095) a ton, while May- delivery soybean oil added 0.9 percent to 8,254 yuan a ton.

CME Group Inc.’s December-delivery palm oil contract, which is pegged to the Malaysian benchmark, climbed as much as 1.7 percent to $837.25 a ton, the highest intraday level in more than two weeks.