February 5, 2015 / 10:44 AM / 5 years ago

VEGOILS-Palm oil notches biggest gain in over 4 yrs on Indonesia's subsidy plan

* Prices rise to 2,315 rgt, highest since Jan. 21
    * Indonesia moves closer to raising biodiesel subsidies
    * Palm oil to end rebound around 2,248 rgt -technicals

 (Updates prices, adds trader comment)
    By Anuradha Raghu
    KUALA LUMPUR, Feb 5 (Reuters) - Malaysian palm oil climbed
more than 5 percent on Thursday, its biggest single-day gain
since October 2010 as the market was buoyed by hopes a plan by
the world's top producer Indonesia to increase biodiesel
subsidies would make blending profitable and as technicals
provided support. 
    The benchmark April contract rose as much as 5.05
percent to 2,315 ringgit ($648) per tonne, its highest since
Jan. 21 and off a 1-1/2-month low of 2,106 ringgit reached last
     "It's to do with the biodiesel issue in Indonesia, what the
energy minister is proposing," said a trader with a foreign
commodities brokerage in Kuala Lumpur. "I think basically
because of that and then charting looks technically friendly."
    Total traded volume stood at a whopping 91,129 lots of 25
tonnes, compared to the usual average of 35,000 lots by the end
of the day.
    Plans by President Joko Widodo's government to ramp up
biodiesel subsidies passed another important legislative hurdle
late on Wednesday, as an influential parliamentary committee
backed a near-threefold increase. 
    The energy parliamentary committee agreed to increase
Indonesia's biodiesel subsidy to 4,000 rupiah (32 U.S. cents)
per litre from 1,500 rupiah per litre now, versus the original
proposal of 5,000 rupiah per litre.
    "That's the game changer," said another trader with a
foreign commodities brokerage in Kuala Lumpur. "That's saying
that biodiesel (blending) will work again."   
    A hike in subsidies could boost the use of palm oil for
blending into biodiesel, a demand that dwindled after crude oil
prices crashed 60 percent between June and late January. 
    The proposal, however, still needs approval from the
parliamentary budget committee which is due to give its verdict
later this month. Some market participants say the jump in palm
futures on Thursday may have been overdone. 
    "There was some over-reaction, that's why prices went that
high," said a third Kuala Lumpur-based trader. 
    Technicals showed that palm oil is expected to end its
current rebound around a resistance at 2,248 ringgit per tonne,
as indicated by its wave pattern and a Fibonacci ratio analysis,
according to Reuters market analyst Wang Tao. 
    Meanwhile, oil prices fell on Thursday, extending
big losses logged in the previous session as record high
inventories in the United States coupled with concern over
global demand cut short a four-day rally. 
    In other competing vegetable oil markets, the U.S. soyoil
contract for March rose 2.84 percent, while the most
active May soybean oil contract on the Dalian
Commodities Exchange edged down 0.44 percent.
  Palm, soy and crude oil prices at 1026 GMT
  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      FEB5    2260   +67.00    2220    2260      70
  MY PALM OIL      MAR5    2318  +110.00    2215    2321    1854
  MY PALM OIL      APR5    2310  +111.00    2197    2315   43664
  CHINA PALM OLEIN MAY5    4802   +36.00    4736    4826  479924
  CHINA SOYOIL     MAY5    5446   -24.00    5410    5492  500812
  CBOT SOY OIL     MAR5   31.41   +16.80   30.55   31.54   12852
  INDIA PALM OIL   FEB5  458.00   +16.80  445.00  458.80    3454
  INDIA SOYOIL     FEB5  629.10    +5.60  622.20  630.00   26030
  NYMEX CRUDE      MAR5   49.07    +0.63   47.36   49.37   58683
  Palm oil prices in Malaysian ringgit per tonne
  CBOT soy oil in U.S. cents per pound
  Dalian soy oil and RBD palm olein in Chinese yuan per tonne
  India soy oil in Indian rupee per 10 kg
  Crude in U.S. dollars per barrel

($1 = 3.5700 ringgit)
($1 = 6.2516 Chinese yuan renminbi)
($1 = 61.8200 Indian rupees)

 (Additional reporting by Charlotte Greenfield in JAKARTA;
Editing by Himani Sarkar and Biju Dwarakanath)
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