Soyoil, traditionally one of the less-traded products on the 158-year-old Chicago Board of Trade, is scaling new heights as investors bet on green fuels amid soaring crude oil prices.

While corn and sugar are used to produce the alternative fuel ethanol, about 90 percent of U.S. biodiesel is derived from soyoil, a byproduct of crushing soybeans into animal feed.

Soyoil futures at the Chicago Board of Trade, the world's largest grain exchange, hit a nine-month high of 26.12 cents a lb. in late April.

The spike coincided with historic highs above $75 a barrel for crude oil and forecasts that gasoline prices in the United States could easily surpass $4 a gallon this summer. CBOT soyoil rallied on Tuesday, as did U.S. energy markets.

All of a sudden soybean oil looks undervalued and you see a lot of the fund money move back into soybean oil as it looks like a cheap energy source, said Randy Mittelstaedt, analyst with Chicago-trade house R.J. O'Brien.

It's more managed money, fund-type money than commercial, agricultural money trading the bean oil, said Mittelstaedt.

Speculators are attracted to markets like soybean oil as the demand for soy biodiesel is seen growing in the years ahead, especially if the price of crude oil, gasoline, heating oil and other energy markets continues to escalate.

The U.S. biodiesel industry is still in its infancy. The National Biodiesel Board, an industry trade group, projects U.S. biodiesel production to reach 150 million gallons in 2006, double last year's figure. That compares with a 3.9 billion gallon U.S. corn-based ethanol market in 2005 and is far below the 44.8 billion gallons of U.S. diesel produced last year.

However, 50 U.S. biodiesel plants are scheduled to come on line in the next 18 months, in addition to the 65 currently producing biodiesel. That would raise capacity to 1 billion gallons, up from the current 395 million gallons, said Jenna Higgins with the National Biodiesel Board.

Oil seems to have gotten ahead of itself. It looks like we have ample supplies currently and probably ample supplies for the next year to meet projected biodiesel demand, said oilseed analyst Anne Frick with Prudential Financial.

Analysts forecast that total U.S. soybean oil use for biodiesel production could reach roughly 1.0 billion lbs. this year -- a fraction of the 20.0 billion lbs. of U.S. soybean oil produced in 2006. It takes 7.5 lbs. of soybean oil to make one gallon of biodiesel.

I don't think the balance sheet really starts to get tight until the '07/'08 season and even then you need to get into '08/'09 before you get a significantly tight balance sheet for soybean oil, Frick added.

Soybeans are crushed into soymeal, a livestock feed, and soyoil which is used in salad dressings, crackers and other foods. Typically, the value of soyoil accounts for 38 to 40 percent of the soybean crush. But the energy boom has pushed the value of soyoil to 41 and 42 percent.

At 42 percent of product value it's historically out of line. But when you have crude oil doing what it's doing ... and everybody jumping on the bioenergy band wagon, it's pushing things around, Mittelstaedt said.

Open interest in the CBOT soybean oil contract, the number of futures positions yet to be closed out and a sign of trading interest, is at an all-time high -- making new records every day this month.

When you look at the open interest and how much of an increase there has been from the large specs, you are definitely seeing the fund totals increasing, said a CBOT trader, who has fund-type customers.

There is a lot of talk of firms offering specialized index funds, a diversified basket of commodities geared to track the biofuels market, that could include corn, sugar, soyoil and rapeseed.

A lot of the new indexes aren't up and running. So the most liquid markets you can get them into are soyoil, corn and sugar, the trader added.

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