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Asia Biofuels Update: Malaysian Palm Oil Strengthens as Market Reopens

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Malaysian palm oil futures firmed on Wednesday following a rise in crude oil and rival soybean oil prices, and as the market reacted to Indonesia's new export policy implemented on June 1.

As the market reopened from holidays, the Bursa Malaysia Derivatives' July crude palm oil contract edged higher by 1.95% to 4,591 Malaysian ringgit ($1,152.04) per metric ton. The August contract inched up 2.07% to 4,629 ringgit/mt.

Indonesia reportedly began a phased implementation of its centralized export system, which will initially cover palm oil, coal, and ferroalloys. Full operation is targeted by Jan. 1, 2027, according to multiple media outlets, citing Coordinating Minister for Economic Affairs Airlangga Hartarto.

During the transition period, Hartarto reportedly said that exporters will continue conducting overseas sales independently, but all export activities must be reported to Danantara Sumberdaya Indonesia, a newly established state-owned entity for improving trade transparency.

Prices for palm oil fresh fruit bunches have declined since Indonesia announced export revamp plans last month. Nonetheless, prices may see a recovery once all technical guidelines are finalized and market conditions normalize, Antara reported, citing Regional Representatives Council Speaker Sultan B. Najamudin.

In H2, global crude palm oil prices are also projected to rise up to $1,500/mt, driven by bullish factors, including elevated crude oil prices, Indonesia's B50 biodiesel rollout in July, and the potential development of El Nino weather phenomenon, according to industry analysts cited by Jakarta Globe.

World Bank data cited by the news agency showed prices averaged $1,051/mt in Q1 and rose to $1,148/mt in April.

After a possible surge in H2, prices may start declining in 2027 once energy markets ease and demand softens as a result of strong prices, Palm Oil Strategic Policy Institute executive director Tungkot Sipayung reportedly said.

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