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Asia Biofuels Update: Palm Oil Recovers as Strong Crude Improves Biofuel Economics

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Malaysian palm oil futures rebounded on Monday after four sessions of losses, as a jump in crude oil prices improved the competitiveness of the commodity as a biofuel feedstock, while stronger soybean oil also provided support.

The Bursa Malaysia Derivatives' October crude palm oil contract firmed 1.13% to 4,723 Malaysian ringgit ($1,160.78) per metric ton. The November contract gained 1.06% to 4,865 ringgit/mt.

Rising crude oil prices due to persisting tensions in the Middle East improved the economics of biofuels over fossil fuels, with the spread between Malaysian crude palm oil and Singaporean gas oil dropping to minus $123.25 per metric ton on Sep. 10 from the 2026 peak of $428.88/mt on Jan. 27, according to Platts assessment.

The current differentials support Indonesia's higher biodiesel blend mandate of 50%, or B50, which is set for full implementation by Oct. 1.

S&P Global Energy Horizons projects Indonesia's domestic biodiesel demand to grow to 13.9 million metric tons this year from 13.2 mmt in 2025.

However, the largely unchanged biodiesel production quota of 15.6 million kiloliters, or around 13.8 mmt, suggests that there is "limited room for demand growth without additional capacity," the research firm said.

The country's plan to further increase its biodiesel blend ratio to 60% next year would therefore require additional biofuel production capacity, according to Wilmar's biofuel head Rahul Kale, as cited by S&P Global.

In the near term, crude palm oil prices are lacking a "clear" direction, price reporting agency MySteel said, noting that weak export demand continues to offset a possible decline in output as oil palms enter the seasonal production-reduction cycle.

Cargo surveyors reportedly estimated Malaysian shipments in the first 10 days of September to have declined between 11.7% and 17.5% from a month earlier. This followed a 7.5% month-over-month drop in August, according to Malaysian Palm Oil Board data.

Prices also fell as "bargain hunting emerged after prices hit a two-week low," Trading Economics said.

Meanwhile, analysts generally expect a strengthening in crude palm oil in the coming months amid improving biofuel viability and drought-driven supply risks.

What else is happening in Commodities?

Commodities

US Natural Gas Prices Snap 4-Week Winning Streak Amid Steady Supplies, Easing Weather Momentum

After four straight weeks in the green, US natural gas prices were down this week amid steady supplies and easing weather-related momentum.In the futures market, the Nymex front-month contract ended the week at $2.820 per million British thermal units on Friday, down from $2.939/MMBtu on Sep. 4.Natural gas spot prices declined to $2.81/MMBtu on Wednesday, down $0.07/MMBtu, according to the US Energy Information Administration's Weekly Gas Storage Supplement, released on Thursday.This was primarily attributed to diverging regional weather, with cooler-than-average temperatures in the West helping offset above-average temperatures across Texas and the Midwest, leading to a 1.5%, or a 1.5 billion cubic feet per day decline in power consumption demand, according to data from S&P Global.Meanwhile, LNG export feedgas flows held steady at 19.6 Bcf/d, which was significantly above the 30-day moving average for this period, at 18.53 Bcf/d, according to the Bloomberg LNG Feedgas Model.Total gas supply remained mostly flat over the week, with a 0.4 Bcf/d, or 7%, decline in imports from Canada offset by a 0.4 Bcf/d, or less than 1% increase in domestic dry gas output.Net injection into storage for the week ended Sep. 4 was 40 Bcf, up from last week's 30 Bcf, bringing total working gas inventories to 3,254 Bcf, according to the EIA's weekly inventory data.The net build was ahead of forecasts at 35 Bcf but well below last year's 71 Bcf and the five-year average for this period, at 52 Bcf, according to data compiled by Investing.com, making it a fairly mixed storage build.At 3,254 Bcf, inventories were 148 Bcf, or 5% above the five-year average for this period, but 79 Bcf, or 2% below the same time last year.All regions reported a net injection during the week, barring South Central, which reported a net withdrawal of 7 Bcf. The East and Midwest led in injections, at 20 Bcf and 18 Bcf, respectively.According to Pinebrook Energy Advisors, the storage data shows that weather is set to play "a reduced role as a price driver" as September progresses and temperatures begin to moderate, that is, before winter makes landfall, leading to significant heating gas demand.A total of 36 LNG carriers departed US ports during the week, up by four from the prior week, with a total combined capacity of 137 Bcf, up 10 Bcf from last week.The US gas rig count increased by two from 130 the previous week to 132 in the week ending Sep. 11, according to data from Baker Hughes (BKR) released Friday. That compares with 118 gas rigs in operation a year earlier.The consolidated North American oil and gas rig count, a key early indicator of future production levels, increased by six to 798 from 792 the previous week.In international markets, European TTF gas prices averaged $25.47/MMBtu for the week ended Sep. 9, $1.59/MMBtu above the prior week. Meanwhile, the Japan-Korea Marker averaged $24.30/MMBtu, about $0.97/MMBtu above the prior week.Meanwhile, the EIA expects natural gas consumption in the electric power sector to reach a record in 2027 as electricity demand continues to grow, according to its monthly Short-Term Energy Outlook for July on Tuesday.The agency forecasts that natural gas use for power generation will increase by 2% in 2026 and by another 4% in 2027, to a record 38.1 Bcf/d. Monthly demand is expected to reach an all-time high of 50.6 Bcf/d in July 2027.Higher electricity demand, additional natural gas-fired generating capacity and relatively low natural gas prices will drive the increase, the EIA said.US gas-fired capacity is expected to reach 508 gigawatts by the end of 2027, up 3% from 2025.Summer natural gas demand for power generation is expected to average 42.2 Bcf/d this year, up 0.5 Bcf/d from summer 2025, before rising to 46.3 Bcf/d in summer 2027.Renewable generation will supply much of the increase in electricity output, while gas plants will continue to meet peak demand, according to the STEO.The EIA expects total US natural gas consumption to increase by 3.1 Bcf/d from 2025 to 2027, with the electric power sector accounting for 2.3 Bcf/d, or 7% of the increase.Weather remains the biggest uncertainty, as hotter summer temperatures could further boost electricity demand.Record Permian production should keep natural gas inventories above the five-year average and limit price gains, the agency said.Working gas inventories are expected to reach 3,966 billion cubic feet by the end of October, 5% above the five-year average.Above-average natural gas inventories heading into winter are expected to keep Henry Hub spot prices at $3.57/MMBtu in Q4 2026, down 5% from the same quarter a year earlier, the EIA said.EIA forecasts the Henry Hub natural gas spot price will ease to $3.43/MMBtu in 2026 and $3.28/MMBtu in 2027, down from $3.53 in 2025, as robust production growth outpaces rising demand.

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Commodities

Russia To Attend G20 Energy Abundance Ministerial in Houston

Russia will attend the G20 Energy Abundance Ministerial in Houston, Texas, as a G20 member, a White House official toldin an emailed response on Friday.The official also noted that Russia attended the Treasury G20 meeting in Asheville, North Carolina.The G20 Energy Abundance Ministerial will run from Monday through Wednesday, with Interior Secretary Doug Burgum, Energy Secretary Chris Wright and White House official Jarrod Agen among the US participants, according to a Reuters report Friday.Energy ministers from Europe and Asia are expected to join the Houston gathering. The European Union is entering winter with unusually low gas inventories, while its plans to reduce Russian energy dependence face setbacks, according to the report.

Commodities

US Natural Gas Update: Futures inch Down on Ample Supply, Milder Weather Outlook

US natural gas futures prices declined slightly in after-hours trade Friday, pressured by plentiful supplies and forecasts for moderating temperatures later this month.The front-month Henry Hub contract and the continuous contract each lost 0.49% to $2.820 per million British thermal units.In earlier trade on Friday, the October contract hit a low of $2.773/MMBtu before recovering.Forecasts of cooling temperatures put pressure on prices. Barchart, citing Commodity Weather Group data, said above-normal temperatures are expected across the South and Southeast through Sept. 20, supporting near-term demand, but most forecasters expect temperatures to cool thereafter.Aegis Hedging pegged average national temperatures at about 76 degrees Fahrenheit Friday, with readings expected to fall by 6 degrees or more in the second half of the month.Cooling demand and powerburn are expected to decline accordingly. Powerburn fell to 46.8 Bcf/d Friday from seasonally high levels of above 50 Bcf/d as temperatures began moderating across the northern US, Gelber & Associates said.Looking further ahead, heating demand may be muted this winter as NOAA's Climate Prediction Center raised the probability of a historically strong El Nino this fall, favoring above-normal temperatures across much of the northern US during winter 2026/27.On the export side, US LNG exports continued to support domestic gas demand. Barchart, citing BNEF data, said feedgas flows to US LNG terminals were near capacity at 19.8 Bcf/d, up 1.5% from the prior week. Annual maintenance at Cove Point LNG could reduce Appalachian feedgas demand by about 850 MMcf/d for up to three weeks from Sept. 19.US output and inventory levels kept the market amply supplied and pressured prices. Natural gas production remained elevated at 112.7 Bcf/d, keeping supply ample despite Canadian imports falling to 4.4 Bcf/d, Gelber said. BNEF said production was up 4.4% year over year.On Thursday, the US Energy Information Administration reported a 40 Bcf storage injection for the week ended Sept. 4, bringing total inventories to 3,254 Bcf, or 5% above the five-year average but 79 Bcf below year-earlier levels.RBC Capital Markets expects storage to peak near 3.9 trillion cubic feet this fall, about 120 Bcf above the 10-year average but 60 Bcf below last year's level. It forecasts a 35-40 Bcf injection in next week's EIA report, below the seasonal norm of 74 Bcf.