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Asia Biofuels Update: Palm Oil Dips on Weaker Crude Oil, Soybean Oil

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Malaysian palm oil futures slipped further on Wednesday, tracking losses in crude oil and rival soybean oil, despite strong exports, the prospect that unfavorable weather could limit supply and the start of Indonesia's B50 biodiesel mandate next week.

The Bursa Malaysia Derivatives' July crude palm oil contract fell 0.24% to 4,589 Malaysian ringgit ($1,105.52) per metric ton. The August crude palm oil contract dipped 0.17% to 4,620 ringgit/mt.

Prices declined despite a reported 19.1% to 25% month-over-month increase in Malaysian shipments for the first 20 days of June, as per the latest cargo estimates.

A strengthening local currency dampened competitiveness of exports, making cargoes more expensive for foreign buyers. The Malaysian ringgit firmed by a further 0.04% against the US dollar on Wednesday.

Malaysia's export market, nonetheless, may find support from Indonesia's expanding biodiesel policy, which will curb exportable supplies.

The Indonesian government is set to raise its palm-based biodiesel blending to 50% from 40%, to reduce reliance on imported fuel. The energy ministry, as cited by multiple media outlets, expects to save 157.28 trillion Indonesian rupiah ($8.76 billion) in foreign exchange this year due to lower fuel imports.

In Malaysia, the government is planning to increase its biodiesel mandate to 30% by 2030, following a shift to 15% from 10% this month, multiple media outlets reported, citing the Ministry of Plantation and Commodities.

The ministry reportedly does not expect B30 to affect Malaysia's exportable volumes, given that the higher blending ratio will just consume about 1.6 million metric tons per year of palm oil, or 7% of the country's total supply.

Malaysia's palm oil industry is export-driven, with around 15.3 mmt allocated to export markets, out of the total 22.8 mmt of domestic production, stocks, and imports, according to the ministry.

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