JAKARTA: Malaysian palm oil edged higher on Wednesday, as traders weighed concerns over El Niño and expectations of tighter Indonesian supplies under the country’s B50 biodiesel mandate.
The benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange gained 11 ringgit, or 0.24percent, to 4,621 ringgit (USD1,131.77) a metric ton at close.
“Threat of El Niño and a potential supply squeeze (from) Indonesian palm oil B50 mandate continued to provide support,” said Anilkumar Bagani, commodity research head at Sunvin Group, a Mumbai-based brokerage.
Indonesia’s mandate to raise the biodiesel blend to 50percent palm oil-based fuel from 40percent will increase crude palm oil use to between 16.3 million and 17 million metric tons from 15.2 million tons, according to Energy Minister Bahlil Lahadalia.
Dalian’s most-active soyoil contract dropped 1.4percent, while its palm oil contract fell 0.37percent.
Soyoil prices on the Chicago Board of Trade eased 0.25percent. Palm oil tracks the price movements of rival edible oils, as it competes for a share of the global vegetable oils market. Sunvin’s Bagani pointed out that palm oil still trades at a discount to rival vegetable oils, supporting demand for the commodity.
Another factor set to push up demand for palm oil is India’s edible oil imports, which are projected to climb between July and October as slower soybean and rapeseed crushing erodes domestic supplies ahead of peak festive demand, industry officials said on Wednesday.
Oil prices rose to near six-week highs on Wednesday due to mounting concerns about disruptions to key Middle Eastern supply routes. Stronger crude oil futures make palm a more attractive option for biodiesel feedstock.
Malaysian crude palm oil is expected to trade between 4,400 ringgit and 4,650 ringgit (USD1,076 and USD1,137) per metric ton in August, the Malaysian Palm Oil Council said on Wednesday.
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