22/07/2010 (Bloomberg) - Palm oil advanced the most in more than three months on the outlook for increased demand from Asian nations set to celebrate major religious festivals.

October-delivery futures rose 2.5 percent to 2,519 ringgit ($784) a metric ton on the Malaysia Derivatives Exchange in Kuala Lumpur, the most since April 9. Prices reached 2,525 ringgit intraday, the highest level since May 10.

“The festival demand for palm oil is lending support,” Krishna Reddy, an analyst at Way2Wealth Commodities Ltd. in Mumbai said. “There’s also concern about the U.S. soybean yields going down because of bad weather, and that’s certain to be positive for palm oil.”

China, India, Pakistan and Indonesia mark their important festivals in the quarter ending September, with communal meals stoking edible oils consumption. Soybean oil competes with palm oil for use in foods.

Greater-than-expected exports of palm oil from in Malaysia, the second-largest producer, pared June stockpiles to a 10-month low of 1.45 million tons, the country’s Palm Oil Board said on June 12. Exports rose 5.5 percent to 1.44 million tons.

Goldman Sachs Group Inc. yesterday forecast crude palm oil for immediate delivery would gain 15 percent and 20 percent this year after dry weather hurt Malaysian production.

PT Astra Agro Lestari, Indonesia’s largest plantation company by market value, said yesterday crude palm oil sales fell 3.3 percent to 477,639 tons in the first half compared with the same period a year earlier.

U.S. Reserves
Soybeans for November in Chicago added 0.5 percent to $9.83 a bushel at 6:07 p.m. Singapore time. The oilseed, up 8.9 percent this month, began the rally after the U.S. government said reserves as of June 1 were at a six-year low.

Soybean oil for delivery in December gained as much as 1.5 percent to 39.64 cents. Soybean oil’s premium over palm oil narrowed to $86.69 a ton from $96.93 yesterday, according to Bloomberg data.

“Palm oil should have been falling as the peak production season is round the corner,” Way2Wealth’s Reddy said, referring to a seasonal increase in output in the second half. “The firmness in the soy complex has prevented a selloff.”

CME Group Inc.’s October-delivery palm oil contract, which is pegged to the Malaysian benchmark price, jumped 0.9 percent to $759.25 a ton yesterday.

On the Dalian Commodity Exchange, January-delivery palm oil surged 1.2 percent to 6,594 yuan ($973) a ton at the 3 p.m. close, while soybean oil gained 0.4 percent to 7,586 yuan a ton.