Palm slips over 1% on bearish MPOB data, still logs weekly gain

KUALA LUMPUR: Malaysian palm oil futures tumbled more than 1% on Friday as industry data showed that stocks climbed to a four-month high in June, with a recovery in production outpacing demand.

The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange was down 83 ringgit, or 1.81%, at 4,511 ringgit ($1,109.17) a metric ton by the close.

The contract has risen 0.69% this week, logging its first weekly gain in three.

With the Malaysian Palm Oil Board data showing stockpiles at these levels, traders are anticipating weaker demand absorption, resulting in downward pressure on prices, said Paramalingam Supramaniam, director at brokerage Pelindung Bestari.

Prices were also pressured by weakness in rival oils, with Dalian’s most-active soyoil contract down 0.93% and its palm oil contract down 1.76%. Soyoil prices on the Chicago Board of Trade edged 0.2% lower.

Palm oil tracks the price movements of rival edible oils, as it competes for a share of the global vegetable oils market.

Oil prices eased but remained on track for weekly gains as renewed U.S.-Iran fighting disrupted shipping in the Strait of Hormuz, stoking concerns over supply disruptions.

Weaker crude oil futures make palm a less attractive option for biodiesel feedstock.

Meanwhile, cargo surveyors estimated that exports of Malaysian palm oil products for July 1-10 rose between 1.6% and 5.1% from a month earlier.

Separately, Indonesia’s mandate to raise the biodiesel blend to 50% palm-oil-based fuel from 40% will increase crude palm oil usage to between 16.3 million and 17 million metric tons from 15.2 million tons, Energy Minister Bahlil Lahadalia said.