KUALA LUMPUR: Malaysian palm oil futures ended 1% lower on Wednesday as weaker rival Dalian oils eclipsed support from forecasts of tight supply, with lower-than-expected biodiesel consumption in Indonesia further hitting sentiment. The benchmark palm oil contract for February delivery on the Bursa Malaysia Derivatives Exchange closed 34 ringgit, or 1.02%, lower to 3,313 ringgit ($813.01) a tonne, declining for a second session in three.
Biodiesel consumption in top producer Indonesia this year will be 13% lower than its target of 9.6 million kilolitres, a senior energy ministry official told a webinar. Indonesia must make policy changes to ensure it can keep subsidising its ambitious biodiesel program, the head of a government agency in charge of collecting and managing palm oil export levies said.
Meanwhile, prices were helped by preliminary surveys indicating Malaysia's crude palm oil production in November falling 10%-15% month-on-month, according to Paramalingam Supramaniam, director of Selangor-based brokerage Pelindung Bestari. Crude palm oil is in short supply, said Paramalingam, adding that persistent heavy rainfall had led to a yield drop this month and the last.
The Council of Palm Oil Producing Countries said on Tuesday palm oil prices would keep rising in the first half of 2021 as global supply squeezed by a La Nina weather pattern was set to remain tight until March.
"We are not expecting any major selling, with a very bullish scenario as far as fundamentals are concerned," Paramalingam added.
Dalian's most-active soyaoil contract fell 1.3%, while its palm oil contract slipped 1.5% amid market talks of China increasing edible oil import duties. Soyaoil prices on the Chicago Board of Trade were down 0.2%. Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
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