Malaysian palm oil futures firmed on Monday as crude oil prices climbed, but gains were capped as high inventories in top producing countries persisted.
The Bursa Malaysia Derivatives' August crude palm oil contract rose 1.21% to 4,584 Malaysian ringgit ($1,120.21) per metric ton. The September contract edged higher by 1.27% to 4,623 ringgit/mt.
Intensified attacks between the US and Iran buoyed crude oil prices, supporting competitiveness of biofuels over fossil fuels due to more favorable economics.
Higher Malaysian exports also supported palm oil prices, after cargo surveyors reportedly estimated a 4% to 12.4% month-over-month rise in July 1-15 shipments.
However, persisting high inventories in Malaysia and Indonesia pressured prices, underpinning the loose supply and demand fundamentals in the near term.
"Until the destocking trend in producing regions reverses, the structural pattern of range-bound fluctuations at lower levels will be difficult to fundamentally change," price reporting agency MySteel said.
RHB Research, as cited by Business Today, said that trading resistance levels remain significant, driven by a bearish market environment, despite a recent price upside.
"The market shows a clear divergence between near-term weakness and longer-term strength," according to MySteel.
Prices could receive some boost going forward amid prospects of tighter supply, due to potential yield impact from a developing El Nino weather phenomenon and expanding biofuel mandate in Indonesia.
Following the implementation of a higher 50% palm-based biodiesel blending in Indonesia on July 1, the country is expected to "completely" halt its diesel imports beginning this month, according to President Prabowo Subianto, as cited by Business Today.