Malaysian palm oil futures slipped further on Friday as June industry data showed an increase in domestic production and inventories, although a weekly gain was expected driven by higher global energy prices.
The Bursa Malaysia Derivatives' August crude palm oil contract rose 1.82% to 4,473 Malaysian ringgit ($1,096.16) per metric ton, and was on track for a 0.34% weekly rise.
The September contract edged higher by 1.76% to 4,513 ringgit/mt, and was set to gain 0.74% over the week.
Data from the Malaysian Palm Oil Board showed that June inventories rose to their highest level since March at 2.5 million metric tons. This also represents an increase from the previous month's 2.4 mmt and last year's 2.0 mmt.
Stocks grew as production climbed 8.08% month over month to 1.6 mmt, offsetting a 6.19% rise in exports to 1.2 mmt.
For the first five days of July, cargo surveyors reportedly estimated Malaysian shipments to have further risen between 10.6% and 11.1% from a month earlier.
Despite today's losses, futures were headed for their first weekly gain in three weeks, as a recent rise in crude oil prices boosted demand sentiment for biofuels due to improving economics.
Stronger fossil fuel prices also support Indonesia's higher 50% biodiesel blend mandate, or B50, introduced on July 1. The government reportedly granted a three-month period for retailers to deplete current B40 stocks and replace with B50.
However, traders are awaiting the government's revised biodiesel allocation for the year to determine the additional volume of palm oil that will be consumed locally.
Uncertainties over the required biodiesel volumes are limiting the price upside for palm oil, according to Sunvin Group's commodity research head Anilkumar Bagani, as cited by Reuters.