Palm oil prices hit their highest in a month after double dose of bullish Malaysian data added to a boost to prices from rising crude oil prices, and the boost to the oilseeds complex from weather threats to South America's soybean crop.
Palm oil futures for April delivery gained 1.5% to 2,616 ringgit a tonne in late deals in Kuala Lumpur, the highest price for a benchmark contract since the first week of January.
Prices of the vegetable oil, set for their fourth successive positive close, had already been on the rebound thanks to threats to the crop of soybeans, the source of rival vegetable oil soyoil, in South America.
"Brazil is expected to experience an unusual hot and dry weather this month while heavy rain across Argentina may affect the soybean production," said Chee Tat, analyst at Singapore-based broker Phillip Futures.
"As such, it may boost the demand for palm oil as a cheaper alternative for food and biodiesel uses, resulting in higher palm oil prices."
Higher crude oil costs have also boosted prospects for prices of palm oil, a major feedstock indeed for making biodiesel, and with northern hemisphere demand potentially to pick up soon.
Palm oil has a higher freezing point than soyoil, making it unsuitable for making biodiesel for use in cold temperatures.
"Benchmark West Texas Intermediate crude is currently trading near the $100-per-barrel price level," Mr Chee said.
"High crude oil cost will hence provide more incentives for a switch to cost-efficient biodiesel during this period of time, supporting palm oil prices as demand for its biodiesel use increases."
However, the rise in palm oil prices gained extra momentum on Monday from data from the Malaysian Palm Oil Board showing inventories of the vegetable oil in Malaysia, the second-ranked producer and exporter after Indonesia, falling for the first time in seven months in January.
The decline, of some 52,000 tonnes month on month to 1.93m tonnes, was also larger than that investors had expected.
And although both production and exports fell by nearly 10%, a reflection of seasonal factors, cargo surveyor Intertek Testing services raised hopes for shipments by pegging them at 309,455 tonnes in the first 10 days of this month, up 4.1% from the same period of January.
The increase was led by India, although shipments to China eased, now that the stockbuilding period ahead of lunar new year celebrations has passed.
The Muslim festival of Eid al-Fitr is seen as the next major calendar boost to demand, although a spur likely to be felt more from next month.
At London-based broker VSA Capital, analyst Edward Hugo said Monday's data had given "strength to our belief in stronger near term pricing.
"Stocks have fallen for the first time since June 2013 and are currently 25% less year on year."
Falling exports, and an implied rise in domestic consumption in Malaysia, which has raised mandated use of biodiesel, "may also be an indication of a wider trend for the year", Mr Hugo said.
"This would likely have a bullish effect on the European benchmark price."