FINWIRES · TerminalLIVE
FINWIRES

Asia Biofuels Update: Palm Oil Extends Losses as Crude Oil Slumps

By

Malaysian palm oil futures declined further on Monday, tracking losses in crude oil prices, although strong July exports and a potential demand recovery in India limited price downside.

Extending the previous week's losses, the Bursa Malaysia Derivatives' September crude palm oil contract fell 0.17% to 4,596 Malaysian ringgit ($1,122.34) per metric ton in midday trade. The October contract dropped 0.19% to 4,634 ringgit/mt.

As the US halted attacks on Iran over the weekend, crude oil prices sharply dropped on Monday, dragging biofuels down due to dampening economics.

Nonetheless, palm oil losses were limited as Malaysia's shipments in July reportedly jumped between 12.1% and 19.5% from a month earlier, according to cargo surveyors. This followed a 5.7% month-over-month rise in June.

The Malaysian Palm Oil Board will release July industry data on Aug. 10.

In Indonesia, the trade ministry reportedly lowered crude palm oil reference price to $996.52 per metric ton in August, compared with July's $1,000.90/mt, due to weaker global demand and softer crude oil prices. Export levy will also be reduced accordingly.

Top palm oil exporters Indonesia and Malaysia expect demand from Indonesia to pick up between July and October as buyers stock up ahead of festivities.

Progressing higher-biodiesel blending in Indonesia and El Nino-related supply risks are also expected to support the market going forward.

However, in the near term, market bearishness may persist, with futures likely to "maintain a weak and volatile trend," price reporting agency MySteel said.

Related Articles

Commodities

US Natural Gas Prices Log Weekly Slide as Soft Demand, Lower LNG Feedgas Flows Weigh on Market

US natural gas prices ended another week lower despite a smaller-than-expected storage injection, as weaker demand and reduced liquefied natural gas feedgas flows pressured the market.In the futures market, the Nymex front-month contract closed the week at $2.792 per million British thermal unit, down from $2.833/MMBtu on July 24.Natural gas spot prices fell $0.39/MMBtu to $2.56/MMBtu during the week ended July 29, from $2.95/MMBtu the prior week, according to the US Energy Information Administration's Weekly Gas Storage Supplement, released Thursday.Amid warmer-than-average temperatures that persisted across most of the country, total natural gas demand rose slightly by 0.3 billion cubic feet per day, or less than 1%, driven by a 0.3 Bcf/d increase in exports to Mexico, while gas-fired power burn declined by 0.4 Bcf/d.Prices dropped across most regional hubs during the week, ranging from a $0.79/MMBtu decrease at the Waha Hub to $0.01/MMBtu at PG&E Citygate.Even Texas, which experienced a heat dome and record-breaking electricity demand during the week, saw prices dip to $1.70/MMBtu on Wednesday, as solar generation across the region set multiple daily and hourly records throughout the past week.Low average LNG export feedgas flows, at 17.2 Bcf/d, also weighed on demand during this period, compared to the record monthly high of 18.8 Bcf/d in April.This is primarily due to the Freeport LNG in Texas, a major facility, undergoing scheduled maintenance starting July 10 and set to last until August.The net injection into storage for the week ended July 24 was 28 Bcf, down from last week's 32 Bcf, bringing total gas inventories to 3,084 Bcf, according to EIA data.Storage injections were significantly below forecasts, which had expected a net build of 37 Bcf. They were also below the prior year's net injection of 44 Bcf, but were ahead of the five-year average for this period at 26 Bcf, according to data compiled by Investing.com.Regional changes in storage were mixed, with only two regions reporting a net injection, the East and the Midwest, both seeing a net build of 23 Bcf.Meanwhile, the Mountain and Pacific regions reported a withdrawal of 2 Bcf and 9 Bcf, respectively, for the week, followed by South Central, which also reported a 9 Bcf draw.At 3,084 Bcf, total US working gas in storage was 32 Bcf, or 1% below the same period last year, but 185 Bcf, or 6% above the five-year average for this period.According to Pinebrook Energy Advisors, the markets have largely shrugged off the warmer prevailing temperatures, as the demand gets offset by "strong production and reduced LNG feedgas flows helping to keep prices under pressure."Weather forecasts remained bearish, with above-normal temperatures expected to blanket most of the country from Aug. 7 through Aug. 13, according to the National Weather Service, keeping space-cooling demand and gas-fired power burn elevated.A total of 35 LNG carriers departed US ports during the week, up one from the prior week, with a total combined capacity of 135 Bcf, up 9 Bcf from last week.The US gas rig count remained unchanged at 127 in the week ending July 31, according to data from Baker Hughes (BKR) released Friday. That compares with 124 gas rigs in operation in the US a year earlier.In international markets, European TTF gas prices averaged $20.17/MMBtu for the week ended July 29, $0.54/MMBtu higher than the previous week.Meanwhile, the Japan-Korea Marker averaged $21.60/MMBtu, about $0.55/MMBtu above the prior week.

$BKR
Commodities

US Natural Gas Update: Futures Rally in Late Trade Amid Bearish Fundamentals

US natural gas futures rebounded in after-hours trading on Friday, following a severe monthly sell-off and shifting mid-August weather reports.Both the front-month Henry Hub contract and the continuous contract gained 1.23% to $2.792 per million British thermal units.Prices have declined since early July, when prices were pegged over $3/MMBtu.Market sentiment softened through most of the day as above-average temperatures in major eastern population centers pointed to weaker cooling demand, while Freeport LNG maintenance reduced LNG feedgas demand and overall supplies remained ample.Despite a smaller-than-expected storage build, inventories remain 6.5% higher than the five-year average, the US Energy Information Administration said Thursday, indicating plentiful supplies."There were no major shifts in the weather outlook or broader fundamentals to drive the market," Pinebrook Energy Advisors said, adding that traders seem comfortable with storage inventories and weaker LNG export demand, leaving prices "in consolidation mode" after the sharp losses earlier in the week.Aegis Hedging said it saw forecast models turn sharply cooler in the Midwest, with Criterion projecting a 22.7-degree Fahrenheit decline across the forecast period.Major population centers, including Chicago, are expected to remain below the 10-year average on nearly every day of the outlook, Aegis Hedging said, citing Commodity Weather Group data. The cooler eastern outlook contrasts with persistent heat in the West, where much of the West Coast and Rockies are forecast to average 4 to 8 degrees Fahrenheit above normal.Barchart, citing BNEF data, said US Lower 48 dry gas production on Friday was a robust 112.7 billion cubic feet per day, up 3.4% from a year earlier.Lower 48 state gas demand was estimated at 80.1 Bcf/d on Friday, up 0.2% over the year, and estimated LNG feedgas flows to export terminals were 17.9 Bcf/d, down 2.2% from the previous week.

Commodities

Brazil Temporarily Increases Mandatory Ethanol Blend to 32%

Brazil will temporarily raise the mandatory ethanol blend in regular gasoline to 32% from 30% beginning Aug. 1 for 180 days, the National Agency of Petroleum, Natural Gas and Biofuels, or ANP, said Friday.The measure applies nationwide to regular gasoline C and premium regular gasoline C. Authorities may extend the temporary rule once for another 180-day period, the agency said.Premium gasoline will continue to contain 25% anhydrous ethanol. ANP added the temporary change does not affect other gasoline specifications, with the Research Octane Number remaining at 94.The agency said the transition period allows producers, distributors and retailers to clear existing inventories manufactured under the previous blending requirements before fully adopting the new specification.Fuel distributors in the South, Southeast, Midwest and Northeast will have 15 days before enforcement begins, while distributors in the North will receive 30 days because of longer transport times.Retail fuel stations will have 30 days to comply in the South, Southeast, Midwest and Northeast. The compliance period extends to 60 days in the North to reflect regional logistical challenges.ANP said inspectors will delay fines and sales restrictions until those transition periods expire.