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Asia Biofuels Update: Palm Oil Extends Losses Ahead of Key Industry Data

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Malaysian palm oil futures eased further on Friday ahead of the July industry data to be released on Aug. 10, although prices still headed for a weekly gain of about 0.3% amid strong exports.

The Bursa Malaysia Derivatives' September crude palm oil contract slipped 0.76% to 4,590 Malaysian ringgit ($1,120.88) per metric ton. The October contract dipped 0.60% to 4,658 ringgit/mt.

Expectations of higher output in July as palm trees entered a peak production phase also weighed on prices, following a Reuters survey showing a 7.4% month-over-month increase to about 1.8 million metric tons.

This lifted inventories, which were estimated to have reached a five-month high in July, despite a 12.1% to 19.5% growth in exports.

India has contributed to the recent export demand increase, following a reported 50% month-over-month jump in palm oil imports to 733,000 metric tons ahead of festivities.

However, the pace of improvement in shipments still lags output growth, slowing destocking in producing countries, according to analysts cited by digital financial platform BigGo Finance.

A softening local currency could provide some export momentum, as it makes exports cheaper for foreign buyers. Malaysian ringgit has so far eased about 0.1% against the US dollar this month.

Other positive market drivers that will support palm oil prices in H2 include the expanding biofuel policies in Indonesia and prospects of lower yields due to a developing El Nino weather phenomenon.

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