By Claire Leow Jan. 27 (Bloomberg) -- Palm oil rose from a two-month low amid concern dry weather caused by El Nino may disrupt supplies and high crude oil prices may lift demand for biofuels. April-delivery futures on the Malaysia Derivatives Exchange gained 0.9 percent to 2,429 ringgit ($709) a metric ton after closing yesterday at the lowest since Nov. 19. “We expect El Niño and tree stress to depress productivity,” said Nirgunan Tiruchelvam, an analyst at Royal Bank of Scotland Asia Securities (Singapore) Pte. in a report today. “Higher crude prices should vastly improve the viability of crude palm oil-based bio-diesel.” Palm oil may average $850 a metric ton this year, more than previously forecast, he said. RBS raised its forecasts to $950 a ton for 2011 and 2012. The estimates assume a crude oil price of $75 a barrel this year, $80 next year and rising above $90 in 2012 as the global economy recovers. Palm oil averaged $681 last year in Rotterdam and ended at $760 a ton yesterday. Central Pacific Ocean temperatures are “well above El Niño thresholds” and some areas “generally remain above values observed at the peak of the 2006 El Niño event,” the Australian Bureau of Meteorology said Jan. 20. El Niño causes dry weather in Southeast Asia, hurting crops. The El Nino weather event and higher demand for biofuels may combine to deplete palm oil stockpiles, Tiruchelvam said. Reserves in Malaysia, the second-biggest producer of palm oil, reached the second-highest level on record last month. ‘Green Energy’ “We see potential for the sector to be re-appraised as a green energy play,” Tiruchelvam said of plantation stocks. Crude oil in New York averaged $62.10 last year and traded little changed at $74.66 a barrel at 6:09 p.m. Singapore time. Palm oil declined to the lowest since Nov. 20 in intraday trading on worries China’s credit tightening measures would hurt the pace of the global economic recovery. Futures fell past a crucial support level of 2,393 ringgit a ton to 2,400 ringgit, a breach that could see prices drop to 2,370 ringgit, according to technical charts, said Ryan Long, a futures trader at OSK Investment Bank Bhd. In China, the largest edible oils user, Dalian palm oil for September delivery gained 0.7 percent to 6,750 yuan ($989) a ton. The commodity has dropped 7.2 percent since the year started. To contact the reporter on this story: Claire Leow in Singapore at cleow@bloomberg.net;

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