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Asia Biofuels Update: Palm Oil Up as Strength in Rival Edible Oil Prices Lend Support

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Malaysian palm oil rose in early Wednesday trade amid firmer prices for rival edible oil markets in Dalian and Chicago markets.

The Bursa Malaysia Derivatives' August crude palm oil contract climbed 0.51% to 4,539 Malaysian ringgit ($1,114.41) per metric ton, while the September contract rose by 0.58% to 4,573 ringgit/mt in early trade.

Prices were supported by a weaker ringgit, stronger edible oil prices in Dalian and Chicago, and expectations of strong export demand, Trading Economics said.

Rising crude oil prices, driven by the latest US airstrikes on Iran and renewed sanctions on its oil exports, also made palm oil more attractive for biodiesel production.

On Tuesday, the Chicago Board of Trade August soybean futures contract closed 0.82% higher at $11.93 3/4 per bushel, while the CBOT August soybean oil futures contract settled 1.22% higher at 68.59 cents per pound.

The US Department of Agriculture has lowered its outlook for Malaysian palm oil output for the 2026/27 marketing year to 19.7 million tons, with dry weather linked with El Nino expected to impact production especially in Q3 and Q4 of the marketing year, according to a UkrAgroConsult report on Tuesday.

The USDA also expects a rise in domestic demand in Malaysia due to the government's decision to introduce its mandatory B15 biodiesel blend on Peninsular Malaysia last month, the report said.

Fundamentally palm oil remains pressured due to a surge in overseas as well as domestic production, inventories at near three-year peaks, and weaker demand due to palm oil's shrinking price advantage over soybean oil, Mysteel said Wednesday.

"End-users are purchasing only for essential needs, and market liquidity remains thin. Overall, the rebound lacks sustained momentum, with futures likely to fluctuate in a low range in the short term and spot basis expected to remain weakly stable," it added.

The Malaysian Palm Oil Board's monthly report is due later this week.

Cargo surveyors expect an up to 11.1% month-on-month rise in palm oil shipments for the July 1-July 5 period.

June exports also showed a rebound from the May slump. However, overall demand likely remained lower than supplies in June, bringing inventories to a record high for the month, according to a Reuters survey.

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