Palm oil advances as crude rally boosts outlook for biofuels
(July 14): Palm oil climbed for a second day as a surge in crude prices fuelled by renewed US-Iran hostilities brightened demand prospects for biofuels.
Futures for the vegetable oil rose as much as 1% in Kuala Lumpur, adding to a 0.5% increase in the previous session. Brent oil has gained more than 11% this week, rising above US$85 a barrel for the first time in a month, as the US launched fresh strikes on the Islamic Republic and US President Donald Trump reimposed a blockade on Iranian ships transiting the Strait of Hormuz.
That’s likely to strain global fossil fuel supplies and boost demand for biofuels, for which palm oil is a key feedstock, according to Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental Ltd.
“Crude oil has rallied again and that will revive biofuel demand,” he said, adding that Indonesia’s recently launched B50 biodiesel blend and Malaysia’s B15 mix are also set to draw on palm supplies from the world’s two biggest producers and raise prices of the tropical oil.
The gain in crude prices has eroded much of palm oil’s premium over gasoil in recent days, according to data compiled by Bloomberg, bringing the two roughly at par.