PALM oil futures in Malaysia declined yesterday as crude oil traded below US$80 a barrel, reducing the appeal of vegetable oils processed to make biodiesel. The contract for May delivery lost as much as 1.3 per cent to RM2,597 a metric ton on the Malaysia Derivatives Exchange before ending at RM2,612. Crude oil for April delivery fell 0.2 per cent to US$78.54 a barrel on the New York Mercantile Exchange at 5.00 pm Jakarta time as analysts forecast US crude supplies increased a fifth week, signaling slowing demand in the world’s largest energy consumer.

“Some funds look at crude oil” prices as a gauge in determining whether it makes sense to use more biodiesel made from palm oil, Donny Khor, a senior president for futures & options at OSK Investment Bank Bhd, said by phone from Kuala Lumpur yesterday. “It’s basically the speculative element.” May-delivery soybean oil, which competes with palm oil for use in cooking oil and biodiesel, lost 0.2 per cent to US$39.8 cents a pound at 5.00 pm Jakarta time in after-hours electronic trading on the Chicago Board of Trade. Environmental issues will also cloud the prospects for palm oil demand as feedstock for biodiesel, according to a report by Fortis Bank Nederland/VM Group yesterday. “In the medium term, demand growth, especially in more mature economies, will be increasingly tied to the use of CPO as a fuel feedstock,” Fortis Bank Nederland/VM Group said. “Yet there is a growing consumerist backlash against CPO, especially for biodiesel, based on concerns that its production is doing serious environmental harm.” Unilever said on December 11 that it suspended purchases from Sinar Mas Group, Indonesia’s biggest palm oil producer, until the company can prove that its plantations aren’t contributing to deforestation in Asia. Unilever has also blacklisted another Indonesian company, PT Duta Palma, for similar reason, the Independent reported in February 22. Source : Business Times