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Asia Biofuels Update: Palm Oil Extends Gains on Rising Crude Oil

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Malaysian palm oil futures rose further on Tuesday as crude oil prices continued to strengthen, but gains were capped as the local currency firmed and export estimates showed mixed signals.

The Bursa Malaysia Derivatives' September crude palm oil contract inched up 0.61% to 4,617 Malaysian ringgit ($1,134.12) per metric ton. The October contract gained by the same extent to 4,746 ringgit/mt.

Malaysian ringgit firmed against the US dollar by a further 0.16% on Tuesday, likely dampening export competitiveness due to resulting higher prices for foreign buyers.

Malaysian shipments in the Aug. 1-15 period reportedly showed mixed trends, with AmSpec Agri Malaysia estimating a 3.2% increase from a month earlier, while Intertek Testing Services assessing a 7.9% drop.

Narrowing price gap between soybean oil and palm oil weighed on demand, particularly in top buyer India, where the premium for soybean oil over palm oil has halved to around $50 per ton from the April level of more than $100 per ton, according to Indian financial news channel NDTV Profit.

Logistical disruptions in the Black Sea, which have curbed arrivals of sunflower oil cargoes, have also supported India's soybean oil purchases, NDTV said.

The country's soybean oil imports are reportedly expected to reach 620,000 metric tons this month, up 46% from the current marketing year's monthly average.

Nonetheless, festive-driven demand could still boost India's palm oil purchases, which have surged month over month in July to 730,965 mt.

This week, "crude palm oil futures are expected to trade with a mildly bullish bias," financial services firm Phillip Capital said, noting resilient demand and prospects of tighter supply.

For far-month contracts, futures are remaining in contango, with February to May 2027 prices recently rising above 5,000 ringgit/mt, according to a Kuala Lumpur-based trader cited by the firm.

"On the forward curve, Indonesia's B50 policy and El Nino-related production cut expectations continue to provide underlying support for far-month contracts," price reporting agency MySteel said.

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