Palm oil futures rebounded from a two-day slide as the outlook for demand improved and crude oil futures climbed above US$60 (RM215) a barrel, raising the appeal of biofuels produced from vegetable oils.

Palm oil for September delivery advanced 2.3 per cent to RM2,036 a tonne on the Malaysia Derivatives Exchange. Earlier, it surged as much as 4.4 per cent, the best intra-day gain since June 23.

August-delivery crude oil in New York gained 1.9 per cent to US$60.80 (RM218) a barrel in Asian trading on signs fuel demand will climb as economic growth in China accelerates.

“Demand for palm oil is stable,” an AM Research report said yesterday. “Although demand from India will slow, this is not expected to last as the festive seasons of Deepavali and Ramadan are envisaged to support exports. In addition, the Indian government recently decided not to impose import duties on crude palm oil.”

Vegetable oil imports by India will rebound from next month as traders stockpile to meet festival demands, the nation’s second-biggest buyer, said. India, the biggest buyer after China, celebrates Deepavali in October.

Imports will increase to between 600,000 and 700,000 tonnes a month through October as a delay in sowing soyabeans and peanuts causes a shortage of local oilseed supplies, Atul Chaturvedi, chief executive officer of Adani Wilmar Ltd, said in a phone interview.

The company is a venture between Adani Group and Wilmar International Ltd, the world’s biggest palm oil trader.

Starting this month, the Muslim world celebrates Ramadan. Food requirements typically soar during the month and domestic demand in Indonesia and Malaysia, which produce almost 90 per cent of the world’s palm oil and have predominantly Muslim populations, typically competes with export orders during the month.

China, the biggest edible oil user, also marks the mid-autumn festival in October, which coincides with harvest time.

“We are sticking to our view that crude palm oil prices will improve, underpinned by demand for the festive season in China, India and Muslim countries,” AM Research said. “There is a possibility that supply would remain short on the back of hot and dry weather. Channel checks with industry players indicate that most are selling at spot prices,” a sign that plantation companies believe prices will rise.

IOI Corp, Malaysia’s second largest plantation firm, said it was selling on the spot market as it was “bullish” on the price outlook. – Bloomberg