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Asia Biofuels Update: Palm Oil Slips on Profit-Taking, Weaker Exports

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Malaysian palm oil futures retreated on Wednesday despite higher crude oil prices, following profit-taking and a decline in exports.

Ending a two-session rally, the Bursa Malaysia Derivatives' October crude palm oil contract eased 0.70% to 4,819 Malaysian ringgit ($1,194.03) per metric ton. The November contract slipped 0.66% to 4,940 ringgit/mt.

Traders locked in profits after the recent rally, while demand remained subdued, Reuters reported, citing Paramalingam Supramaniam, director at brokerage Pelindung Bestari.

Cargo surveyors reportedly estimated Malaysian shipments in August to have fallen 6.5% to 14.9% from a month earlier. This reverses the export growth recorded in June and July.

The Malaysian ringgit firmed against the US dollar by about 1.5% in August, dampening export competitiveness due to resulting high cargo prices. The local currency showed some weakening in the first two days of September, potentially improving attractiveness of shipments.

Higher palm oil prices relative to soybean oil also weighed on demand, particularly in key importers India and China, although upcoming festivities may provide some upside.

In the EU, palm oil imports for the current marketing year that began in July slumped 21% year over year, according to data cited by Trading Economics.

Meanwhile, a widening discount between palm oil and gas oil due to rising crude oil prices improved biofuel demand sentiment.

Weather-driven supply risks also continued to provide upward momentum, as a developing El Nino weather phenomenon may curb fresh fruit bunch production going forward.

Palm oil futures may remain firm and exceed 5,000 ringgit/mt in the near term following a recovery in late August, according to Reuters technical analyst Wang Tao.

PhillipCapital also expects the market to remain "mildly bullish" after the recent price rebound to the 5,000 ringgit/mt mark.

"Palm oil futures are expected to trade in a volatile range at elevated levels," price reporting agency MySteel said, citing a combination of bearish and bullish market drivers.

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