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Asia Biofuels Update: Palm Oil Falls; Futures Head for Weekly Loss

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Malaysian palm oil futures dropped further on Friday, bringing weekly losses to about 1.8%, pressured by weaker rival oils on the Dalian exchange and a firmer currency that erodes export competitiveness.

The Bursa Malaysia Derivatives' August crude palm oil contract dipped 0.40% to 4,460 Malaysian ringgit ($1,097.66) per metric ton. The September contract lost 0.42% to 4,487 ringgit/mt in midday trade.

Malaysian ringgit was set to post its second weekly gain against the US dollar, dampening attractiveness of exports due to resulting higher costs for foreign buyers.

In India, palm oil imports in June reportedly dropped to their lowest in 14 months due to lackluster demand and decreasing economics of palm oil versus other rival oils, according to dealers cited by Reuters.

Nonetheless, cargo surveyors reportedly estimated that Malaysian shipments in June still grew month over month between 10.6% and 11.1%. Monthly industry data will be available on July 10.

Palm oil prices were also under pressure amid prospects of higher production in the coming weeks, according to IcebergX trader David Ng, as cited by Bloomberg.

As prices dropped, Ng reportedly noted that the market did not react significantly to Indonesia's expanded biofuel policy that began on July 1.

Still, analysts expect prices to remain supported in H2 driven by the accelerated biodiesel mandate and a potential tightening in supplies due to the anticipated strong El Nino weather phenomenon.

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