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Asia Biofuels Update: Palm Oil Extends Losses as Bearish Fundamentals Offset Improving Biofuel Economics

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Malaysian palm oil futures retreated for a fourth consecutive session on Friday, with weekly losses expected to exceed 1%, as ample supply and weak exports offset positive biofuel demand sentiment from elevated crude oil prices.

The Bursa Malaysia Derivatives' October crude palm oil contract eased by a further 0.55% to 4,690 Malaysian ringgit ($1,159.60) per metric ton. The November contract lost 0.57% to 4,857 ringgit/mt. Both contracts tracked losses in rival soybean oil.

Malaysian inventories of palm oil, a key biodiesel feedstock, rose to an eight-month high of 2.8 million metric tons in August as production grew 1.4% from a month earlier to 1.8 mmt, while exports dropped 7.5% to 1.3 mmt, according to Malaysian Palm Oil Board data.

Shipments in September have so far remained slow, with cargo surveyors reportedly estimating exports in the first 10 days of the month to have dropped between 11.7% and 17.5% from the same period in August.

Nonetheless, improving biofuel economics, with Brent crude prices rising above $100 per barrel due to Middle East tensions, provided support.

In Indonesia, where a higher 50% biodiesel blend, or B50, is set for full implementation in October, lower palm oil prices compared with gas oil are expected to reduce the subsidy burden of the new biofuel mandate, New Straits Times reported, citing CIMB Securities.

The country is also considering increasing its biodiesel blend further to 60% next year.

The investment bank reportedly projects palm oil prices to trade between 4,400 ringgit/mt and 4,600 ringgit/mt in the near term, amid higher biofuel margins and prospects of lower output in 2027 due to the El Nino weather phenomenon.

Meanwhile, price reporting agency MySteel expects prices to continue fluctuating amid bearish industry data, as the market "lacks a clear direction."

Palm oil prices could average 4,450 ringgit/mt this year and strengthen to 4,550 ringgit/mt in 2027, according to CIMB Securities.

What else is happening in Commodities?

Commodities

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Commodities

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Commodities

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