Palm oil futures fall despite Indonesia’s biodiesel push

KUALA LUMPUR: Malaysian palm oil futures fell on Wednesday, reversing course after four straight sessions of gains, despite Indonesia’s plans to go ahead with the rollout of its B50 biodiesel blending plan.

The benchmark palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange shed 60 ringgit, or 1.24%, to 4,768 ringgit ($1,184.89) a metric ton at closing.

Crude palm oil futures traded higher midday, following the confirmation of Indonesia’s B50 biodiesel programme and upward momentum in energy prices, said Anilkumar Bagani, commodity research head at Sunvin Group, a Mumbai-based brokerage.

Indonesia’s senior economic minister Airlangga Hartarto said the country will raise the mandatory blending rate for palm-based biodiesel to 50%, or B50, from 40% currently starting July.

Indonesia’s palm oil association said demand for biodiesel feedstock was expected to hit about 15 million metric tons this year after factoring in the B50 programme, up by 2 million tons from last year.

“Stronger Malaysian palm oil export performance in March, a weaker ringgit and higher Chinese vegetable oil futures also provided further support,” Bagani added.

However, Bagani said fresh destination demand has softened, with fresh purchases from India lacking due to high prices and sharp volatility in the rupee against the U.S. dollar, prompting importers to step back and limit their exposure.

Cargo surveyors estimated March exports of Malaysian palm oil products rose between 44.3% and 56.7% from February.

Dalian’s most-active soyoil contract fell 0.92%, on Wednesday, while its palm oil contract shed 1.59%. Soyoil prices on the Chicago Board of Trade eased 1.16%.

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

Oil reversed earlier gains as uncertainty over the situation in the Middle East unnerved markets and U.S. President Donald Trump again suggested the U.S.-Israeli war with Iran could be nearing an end.

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

The ringgit, palm’s currency of trade, strengthened 0.54% against the dollar, making the commodity slightly more expensive for buyers holding foreign currencies.