Malaysian palm oil futures rebounded on Wednesday as crude oil prices rose and as strong exports and long-term weather-related supply risks provided support.
Following two sessions of losses, the Bursa Malaysia Derivatives' August crude palm oil contract recovered 0.64% to 4,569 Malaysian ringgit ($1,111.25) per metric ton. The September contract firmed 0.67% to 4,636 ringgit/mt.
Malaysian palm oil shipments for the July 1-25 period reportedly grew between 8.1% and 15.9% from a month earlier based on cargo surveyor estimates. This followed a 6.2% month over month rise in June.
A potential rebound in Indian demand ahead of Diwali could boost exports from Malaysia and Indonesia going forward.
However, exportable supplies from Indonesia may be limited as the country progresses with its higher 50% palm-based biodiesel blending mandate, or B50.
State-owned energy company Pertamina began the nationwide rollout of B50 and plans to complete the distribution of biodiesel at all fuel stations by Oct. 1, BioEnergy Times reported.
To support the export market, Indonesia is reportedly seeking a US tariff exemption for palm oil exports, after the US imposed a 10% duty on nations associated with forced labor. Top palm oil producers Indonesia and Malaysia are among the countries that received the penalty in July.
On the supply side, near-term production is expected to remain robust as palm trees remain in peak seasonal output, while long-term yields are likely to decrease amid expectations of a strong El Nino weather phenomenon toward the end of the year through early 2027.
Price reporting agency MySteel sees market fundamentals as mixed, with near-term balance remaining loose while the long-term outlook appears tight due to the potential El Nino impact.
"...the scope for deep declines remains limited due to support from longer-term supply concerns," it said.