26/04/2010 (Bloomberg) - Palm oil advanced as crude oil rose for a third day, boosting the appeal of vegetable oils used in biofuels as alternative energy.

Palm oil for July delivery gained as much as 1.1 percent to 2,568 ringgit ($809) a metric ton, the highest price for the most-active contract since April 9. It was at 2,556 ringgit on the Malaysia Derivatives Exchange at 12:10 p.m.

"Crude palm oil looks to be tagging the rise in crude oil today," said Arhnue Tan, a senior analyst at ECM Libra Capital Sdn. in Kuala Lumpur.

Palm oil has tracked crude oil's weekly movements for the past 11 weeks. Crude oil in New York for June delivery rose 0.4 percent to $85.46 a barrel at 11:44 a.m. Singapore time amid optimism that the global economic recovery will boost demand.

The gains came even as data showed palm oil exports from Malaysia, the second-biggest producer, tumbled 15 percent in the first 25 days of April compared with the same period in March, according to independent market surveyor Intertek.

A total of 947,304 tons of shipments were tracked from April 1 to 25, down from 1.1 million tons in the same period in March, Intertek said in an e-mailed statement in Kuala Lumpur. Shipments to the two largest consumers dropped, with exports to China down 12 percent to 285,707 tons, and to India and the subcontinent down 53 percent to 124,700 tons.

Export Data
"It's been expected to be weak for this month, especially from those two regions," Tan said. "For China, numbers should normalize eventually as the current decline is because of a stock build up, which was reported by China last week."

China's palm oil inventories are at the highest in 1 1/2 years, with stockpiles at ports estimated at 546,000 tons, the China National Grain & Oils Information Center said on April 15.

"As for India, we believe the decline could be due to competition with soy oil as the crude palm oil-soy oil discount has narrowed considerably," Tan said.

Soybean oil in Chicago for July delivery gained as much as 0.8 percent to 40.19 cents a pound, and was at 40.11 cents at 11:41 a.m. Singapore time. That put its premium over palm oil at $79.92 a ton, a two-week low, according to Bloomberg data. That compares with a 12-month average premium of $130.93 a ton.

In China, palm oil traded in Dalian rose for a second day to gain 0.6 percent to 7,004 yuan ($1,026) a ton at the 11:30 a.m. trading break. Dalian soybean oil was little changed at 3,995 yuan a ton. China produces soybeans, which are crushed for meal and oil; the nation's palm oil supplies have to be imported.