Palm slips over 1% after no duty waiver but still log weekly gain

KUALA LUMPUR: Malaysian palm oil futures slipped more than 1% on Friday, after the government did not announce an expected export duty waiver in its Budget, though the contract still posted its first weekly gain in three weeks.

The benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange slid 69 ringgit, or 1.48%, to 4,592 ringgit ($1,124.66) a metric ton at the close. The contract gained 1.26% this week.

Palm oil futures reversed earlier gains as optimism over a possible Malaysian export duty waiver faded after the anticipated government Budget announcement failed to materialise, said David Ng, a proprietary trader at Kuala Lumpur-based trading firm Iceberg X Sdn Bhd.

The market had speculated that Malaysia may propose waiving export duties on crude palm oil during Friday’s budget session, thus, making its exports more competitive with those of rival Indonesia. However, during the budget announcement, the government only announced support measures focused solely on replanting assistance for smallholders.

“Looking into next week, we expect cautious trading as investors assess the upcoming Malaysian Palm Oil Board supply-demand report, particularly September inventories and export performance,” he added.

Malaysia’s palm oil inventories are expected to hit an all-time high in September, topping the December 2018 peak, as production soared to record volumes, outpacing sluggish export demand, a Reuters survey showed.

MPOB is expected to release its data on Monday.

Dalian’s most-active soyoil contract rose 0.91%, while its palm oil contract added 0.83%. Soyoil prices on the Chicago Board of Trade BOcv1 were up 0.49%.

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

Oil prices fell as Middle East supply concerns eased after US President Donald Trump said the country would not attack Iran before US elections next month, amid productive talks to end their war that has disrupted global energy markets.

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

The ringgit, palm’s currency of trade, strengthened 0.12% against the dollar, making the commodity slightly more expensive for buyers holding foreign currencies.