KUALA LUMPUR: Malaysian palm oil futures fell over 1% on Wednesday, on course to end two sessions of gains, as rival soyoil fell after the U.S raised a proposal to scale back biofuel blending mandates.
The benchmark palm oil contract for February delivery on the Bursa Malaysia Derivatives Exchange slid 65 ringgit, or 1.32%, to 4,864 ringgit ($1,152.61) a tonne by the midday break.
"Market took a dip after the sell off in Chicago soyoil due to the lower blending mandate by US Environmental Protection Agency," said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.
The Biden administration on Tuesday proposed scaling back the amount of biofuels that US oil refiners were required to blend into their fuel mix since the onset of the COVID-19 pandemic.
Palm oil is facing reduction in December production and labour shortage woes, but demand is tapering and that could cap prices from rallying further at least until the end of the year, Paramalingam added.
Soyoil prices on the Chicago Board of Trade fell 2.5%. Dalian's most-active soyoil contract eased 0.6%, while its palm oil contract also slipped 0.7%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
Oil prices edged lower, as investors tried to assess the full impact of the Omicron coronavirus variant on global fuel demand and the effectiveness of existing vaccines.
Weaker crude oil futures make palm a less attractive option for biodiesel feedstock.
Palm oil may rise more towards the peak of the wave b at 5,069 ringgit per tonne, as its uptrend from 4,032 ringgit may have resumed, Reuters technical analyst Wang Tao said.
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