Malaysia palm futures gain 1.5 pct on soy oil rally

Malaysian crude palm oil futures rose 1.5 percent on Tuesday, extending five days of gains as soy oil markets started to rally on a mix of weather concerns and strong crude oil prices.

Palm oil's steady rise over the week was prompted by analysts' forecasts that it may restart its rally on record crude oil prices.

The vegetable oil, used in products from bio-fuels to ice-cream, is roughly 17 percent off record highs of 4,486 ringgit in March but has gained nearly 21 percent so far this year.

By the midday break, the benchmark August contract on the Bursa Malaysia Derivatives Exchange rose 54 to 3,727 ringgit ($1,148) per tonne.

"Soy oil on CBOT and Dalian are giving support to palm oil. In fact, its weather play and rising demand that has bumped up agricultural complexes all over with crude oil in the background," said a trader with a foreign commodities brokerage.

Other traded months rose between 19 and 49 ringgit. Traded volumes stood at 3,505 lots of 25 tonnes each, easing from the usual 5,000 lots.

Unfavourable weather over the last week and in late April across Argentina's farm belt may hurt the 2007/08 soy crop, but the crop is still expected to total 48 million tonnes, the Buenos Aires Grains Exchange said.

Soy oil for July delivery at the Chicago Board of Trade rose 1.8 percent while the most-active September contract on the Dalian Commodity Exchange jumped 3.2 percent.

Malaysian crude palm oil prices may resume their rally if record crude oil prices boost demand for alternative fuels, soaking up high stocks, leading industry analysts said last week.

Top analysts Dorab Mistry and James Fry noted record crude oil's growing influence on vegetable oils like palm, thanks to the increasing biodiesel incentives and mandates in Europe and the Americas, and to some extent Asia.

Oil was little changed at around $133 a barrel on Tuesday after news of another attack on Nigerian oil facilities refocused concerns on immediate supplies.

In Malaysia's physical market, crude palm oil for May shipment in the southern region was quoted at 3,700/3,715 ringgit. Trades were done between 3,700 and 3,710 ringgit a tonne.