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Asia Biofuels Update: Palm Oil Rebounds; Weekly Loss Expected as Crude Oil Plunges

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Malaysian palm oil futures recovered on Friday as exports remained robust, but weekly losses above 1% were expected as declining crude oil prices weighed on the market.

The Bursa Malaysia Derivatives' July crude palm oil contract gained 0.69% to 4,544 Malaysian ringgit ($1,092.99) per metric ton, and was set to ease 1.09% over the week. The August crude palm oil contract was up 0.79% to 4,571 ringgit/mt, and was on track for a 1.10% weekly loss.

Cargo surveyors cited by Trading Economics estimated Malaysian shipments for the June 1-25 period to have risen between 10.6% and 11.1% from a month earlier.

Exports grew despite a 1% strengthening of the Malaysian ringgit versus the US dollar this week, a trend that directionally dampens the attractiveness of cargoes due to the resulting higher costs for international buyers.

Meanwhile, biofuel viability may diminish as crude oil prices declined following the US-Iran deal.

Indonesia, nonetheless, looks set to begin the implementation of B50, a 50% palm-based biodiesel blend, on July 1 following positive road test results.

The government will give fuel retailers a three-month transition period to clear out existing B40 stocks, media outlets reported, citing renewable energy director general Eniya Listiani Dewi.

The new biofuel mandate is aimed at curbing diesel imports. President Prabowo Subianto, as cited by news agencies, projected that the country will achieve energy self-sufficiency in three to four years.

Lower exportable supplies from Indonesia following the B50 rollout are expected to support palm oil prices going forward, particularly as yields decline due to a developing El Nino weather phenomenon.

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