MARKET DEVELOPMENT
Falling Crude Seen by Oil World Pressuring Vegetable Oil Prices
Falling Crude Seen by Oil World Pressuring Vegetable Oil Prices
03/12/2014 (Bloomberg) - Prices of vegetable oils made from crops including rapeseed may decline as falling crude cuts demand for biofuels, Oil World said.
While discretionary blending of vegetable oils into biofuels in the past two years has kept a floor under prices, the markets have become increasingly tied to energy, the Hamburg-based researcher said in a report. West Texas Intermediate crude fell yesterday to the lowest since July 2009 amid a supply glut. Vegetable oils from rapeseed and soybeans can be blended with fossil fuels for energy used in transportation and heating.
“Vegetable oils will now have to adjust to energy prices on a correspondingly lower level,” Oil World said. “The market will need to fine tune price differentials cautiously so that the demand for energy is being trimmed only partly.”
Soybean oil futures tumbled 4.4 percent since Nov. 26 on the Chicago Board of Trade. OPEC said last week it will maintain its production target of 30 million barrels of oil a day in spite of calls from some members to cut output to stem the rout in prices. Crude oil plunged 14 percent last week in New York.
Rapeseed fell 0.6 percent last week in Paris and is down 7.1 percent this year. Rapeseed, which has a higher oil-yielding seed than some other crops, may “feel the repercussions of a further massive decline of crude mineral oil prices,” Oil World said.
Palm oil, which also can be used as a biofuel, slid 2.8 percent last week on Bursa Malaysia Derivatives in Kuala Lumpur, the first decline in three weeks. Prices may increase “both in absolute terms and relative to fossil fuels in the further course of this season, affecting consumer interest for the tropical oil,” Oil World said. Production has been affected by dry weather in Indonesia and Malaysia, the top two producers, according to the report.
While discretionary blending of vegetable oils into biofuels in the past two years has kept a floor under prices, the markets have become increasingly tied to energy, the Hamburg-based researcher said in a report. West Texas Intermediate crude fell yesterday to the lowest since July 2009 amid a supply glut. Vegetable oils from rapeseed and soybeans can be blended with fossil fuels for energy used in transportation and heating.
“Vegetable oils will now have to adjust to energy prices on a correspondingly lower level,” Oil World said. “The market will need to fine tune price differentials cautiously so that the demand for energy is being trimmed only partly.”
Soybean oil futures tumbled 4.4 percent since Nov. 26 on the Chicago Board of Trade. OPEC said last week it will maintain its production target of 30 million barrels of oil a day in spite of calls from some members to cut output to stem the rout in prices. Crude oil plunged 14 percent last week in New York.
Rapeseed fell 0.6 percent last week in Paris and is down 7.1 percent this year. Rapeseed, which has a higher oil-yielding seed than some other crops, may “feel the repercussions of a further massive decline of crude mineral oil prices,” Oil World said.
Palm oil, which also can be used as a biofuel, slid 2.8 percent last week on Bursa Malaysia Derivatives in Kuala Lumpur, the first decline in three weeks. Prices may increase “both in absolute terms and relative to fossil fuels in the further course of this season, affecting consumer interest for the tropical oil,” Oil World said. Production has been affected by dry weather in Indonesia and Malaysia, the top two producers, according to the report.