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Asia Biofuels Update: Stronger Crude Oil Prices Lift Malaysian Palm Oil

-- Malaysian palm oil futures rose on Monday, following two weekly losses, as crude oil prices climbed after the US seized an Iranian cargo ship allegedly attempting to run through the blockade, raising uncertainties over another round of US-Iran peace talks.

The Bursa Malaysia Derivatives' May crude palm oil contract jumped about 1.03% to 4,431 Malaysian ringgit ($1,119.65) per metric ton. The June contract gained 1.11% to 4,471 ringgit/mt.

Palm oil remained sensitive to crude oil price movements, as its competitiveness as a biofuel feedstock hinges on fossil fuel price increase.

In Indonesia, imports of conventional diesel will discontinue from July 1, coinciding with the government's target implementation date for a higher biodiesel blend of 50%, or B50, local news agency Antara reported, citing Minister of Agriculture Andi Amran Sulaiman.

The government was also evaluating the use of palm oil in gasoline, in collaboration with state-owned plantation firm Perkebunan Nusantara IV, Sulaiman reportedly said.

In Malaysia, biodiesel companies were scaling up production to support the government's move to expand its biodiesel program from the current B10 to B12 initially, and then to B15.

Deputy Prime Minister Ahmad Zahid Hamidi, as cited by The Star, reportedly said 19 biodiesel plants were proposing to scale output by utilizing sludge, a by-product of crude palm oil processing.

The initiative aims to lower costs by mass production. At present, the facilities are producing about 1.5 million liters per month of biodiesel.

The Malaysian Palm Oil Board earlier said that around 130,000 metric tons of biodiesel will be added to annual consumption once B12 is implemented, while another 204,000 mt will be added with B15.

Analysts cited by The Edge Malaysia said the country has room to produce more biodiesel, with only 975,207 mt produced in 2025 out of the total installed capacity of about 2.36 million metric tons per year.

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