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Asia Biofuels Update: Malaysian Palm Oil Slips on Weaker Fundamentals

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Weaker market fundamentals offset the influence of rising crude oil and rival soybean oil to weigh on Malaysian palm oil futures on Tuesday.

The Bursa Malaysia Derivatives' June crude palm oil contract dipped 0.96% to 4,441 Malaysian ringgit ($1,128.88) per metric ton, and the July contract dropped 1.13% to 4,465 ringgit/mt, in midday trade.

Lower exports and higher production in April, which lifted domestic stocks, pressured prices. Malaysia's exports declined 14.3% from a month earlier to 1.3 million metric tons, as production jumped 18.4% to 1.6 mmt, industry data showed.

At the same time, Malaysian inventories rose 1.7% month over month to 2.31 mmt, and remained significantly higher than the year-ago levels of 1.87 mmt.

In May, export demand trends were mixed, with Intertek Testing Services estimating shipments to have risen 8.5% during the first 10 days of the month versus the same period in April, and AmSpec Agri Malaysia assessing a 10.8% decline, Trading Economics reported.

A weaker local currency could boost export competitiveness, particularly with the Malaysian ringgit edging lower by another 0.43% against the US dollar on Tuesday.

Going forward, expectations of increased domestic demand in Malaysia and Indonesia, the with implementation of higher biofuel mandates in sight, are likely to support prices.

For this week, PhillipCapital said prices are likely to be "rangebound, due to stronger Chicago soybean oil and crude oil prices, supported by improving export data and a weaker ringgit."

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