Crude palm oil (CPO) futures traded on the Malaysian derivatives exchange hit a fresh record Tuesday, extending gains from Monday, driven by strong soybean futures in the US.

At 12.30 pm, the benchmark CPO futures contract for May delivery was up 1 ringgit at an all-time high of 3,600 ringgit per metric ton. It closed at 3,599 ringgit on Monday.

“Current strong prices are largely due to the surge in US soybean prices,” said Yin Shao Yang, plantation analyst at Kenanga Investment Bank.

Soybean futures rose to a record last Friday on the Chicago Board of Trade, surpassing 14 dollars a bushel for the first time amid expectations of rising demand in China for the grain used to feed livestock and make biofuel.

Soybean prices have surged 9.5 percent so far this year, buoyed by dwindling stockpiles and growing demand in China, the world’s largest soybean buyer.

China’s agriculture minister has warned that bad winter storms had severely damaged 40 percent of the country’s rapeseed crop — leading investors to bet the country will boost buying of soybeans to make up for the shortfall.

“The declining US dollar has pushed up demand for all commodities, except gold, as investors bought raw materials as a hedge against inflation,” said HLG Research.

“We expect higher prices for most commodities ahead on supply constraints and inflation, while crude oil trading shall remain volatile on geopolitical risks and uncertainty over supply.”

High crude oil prices have also benefited CPO as it can be used as feedstock in the production of biodiesel.

“Despite healthy stockpile data, prices of CPO are expected to extend gains on the back of expensive soyoil prices and its usage as a biofuel source,” said HLG.

Malaysia’s palm oil inventory hit a fresh record in January but the level is not sustainable given the tight global supply for edible oils, analysts said.

Palm oil stock, including CPO and processed palm oil, rose by 27 percent to 1.875 million tons in January from a year earlier, according to government data.

A strong recovery in palm oil output and a sharp drop in exports helped push up the inventory level.

Indonesia and Malaysia together account for more than 80 percent of the world’s total palm oil output.

(1 US dollar = 3.22 ringgit)