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Asia Biofuels Update: Palm Oil Dips Ahead of June Data; Strong Crude Oil Supports

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Malaysian palm oil futures slipped on Thursday amid cautious trading ahead of the release of key June industry data, but recent increases in crude oil prices capped gains.

The Bursa Malaysia Derivatives' August crude palm oil contract dipped 0.31% to 4,558 Malaysian ringgit ($1,116.99) per metric ton. The September contract lost 0.28% to 4,596 ringgit/mt.

Prior to the Malaysian Palm Oil Board's monthly data to be released on July 10, a Reuters survey showed June inventories reached a record high for the month due to high production and subdued demand.

According to price reporting agency Mysteel, industry estimates showed month-over-month increases in June output and stocks during the peak production season.

Cargo surveyors, meanwhile, reportedly estimated Malaysian shipments to have grown month over month in June.

Robust exports extended through the first five days of July, with preliminary estimates showing shipments rose between 10.6% and 11.1% from a month earlier, according to Trading Economics.

Competitiveness of exports improved as the local currency eased against the US dollar for a second straight session on Thursday. Malaysian ringgit has so far weakened 0.20% this week, making cargoes cheaper for international buyers.

Malaysian exports could receive a boost as Indonesia's exportable supplies decrease with the gradual implementation of its higher 50% biodiesel blend mandate beginning July 1.

The Indonesian Palm Oil Association, as cited by Jakarta Globe, said the expanded biofuel policy could reduce crude palm oil exports by 2 million metric tons in H2.

Nonetheless, the government was reportedly optimistic that domestic crude palm oil supplies of around 46 mmt will be sufficient to sustain the biodiesel program, which is projected to raise domestic demand by 5.3 mmt on an annual basis.

Expanding biofuel policies were supported as the crude oil market recently strengthened following renewed tensions in the Middle East.

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