28/06/2010 (Bloomberg) - Palm oil advanced as much as 1.1 percent on the prospect that high crude oil prices may lift demand for bio-diesel and as sales from Indonesia grew for the first time in five months, led by Chinese orders.

The September-delivery contract added 0.7 percent to 2,400 ringgit ($744) a metric ton on the Malaysia Derivatives Exchange, erasing last week’s decline. Palm oil, used in food and biofuels, gained 1 percent to 2,410 ringgit in intraday trading.

Crude oil climbed in early Asian trading to the highest in more than seven weeks as Alex, the first named tropical storm of the Atlantic, moved into the southwestern Gulf of Mexico. Prices fell as much as 1.1 percent to $78.02 a barrel in late trading. The commodity has gained 6.2 percent this month.

“Crude palm oil prices will likely be range-bound to the end of the year,” according to a report by ECM Libra Capital Sdn. Palm oil “prices will just mildly track crude oil.”

Palm oil shipments from Indonesia, the largest producer, gained 1 percent from a month earlier to 1.04 million tons in May, the Indonesian Palm Oil Association said today. Sales to China, the largest user, jumped 75 percent to 246,854 tons.

The tropical commodity also tracked soybeans and soybean oil higher.

November-delivery soybeans in Chicago gained as much as 0.4 percent to $9.1575 a bushel, the first advance in five sessions, after Telvent DTN Inc. said the La Nina weather pattern may hurt crops in the U.S., the largest exporter, and South America.

Output losses in the U.S., Argentina and Brazil, which make up 82 percent of global soybean output, may end a 13 percent slump in prices in Chicago this year. Prices declined this year because of record crops.

Record Oilseed Crops

Global oilseed harvests are at a record this year on rising soybean output in South America, OilWorld, an industry publication, said on June 18.

Palm oil has failed “all its attempts to recoup the key psychological threshold in the recent weeks,” said a RHB Research Institute Sdn. report today. The “grossly bearish” technical charts imply “crude palm oil is likely to see further pullback this week” to trade between 1,990 and 2,200 ringgit a ton, the report said.

CME Group Inc.’s September-delivery palm oil contract, which is pegged to the Malaysian benchmark price, gained 0.6 percent to $740.75 a ton.

On the Dalian Commodity Exchange, January-delivery palm oil dropped 0.3 percent to 6,474 yuan ($953) while Dalian soybean oil lost 0.2 percent to 7,542 yuan a ton.