Commodities
Asia Biofuels Update: Palm Oil Falls but Heads for Weekly Gain
Malaysian palm oil futures edged lower on Friday tracking losses in crude oil and soybean oil, although weekly gains were expected as strong Indian demand and Indonesia's B50 roll-out lent support.The Bursa Malaysia Derivatives' October crude palm oil contract eased 0.64% to 4,682 Malaysian ringgit ($1,150.71) per metric ton in midday trade. The November contract was down 0.85% to 4,791 ringgit/mt."Since late August, the Malaysian palm oil market has continued the pattern of strong supply and weak demand," market intelligence provider SunSirs said.Malaysian shipments of palm oil, a key biodiesel feedstock, reportedly declined by 17.8% to 25.6% in the first half of September relative to month-ago levels.While restocking in India ahead of festivities provided support, future purchases are expected to be constrained by available storage capacity and the price spread between soybean oil and palm oil, according to the firm. India's palm oil imports reportedly rose to a six-month high of 782,761 metric tons in August.Slow exports and high seasonal production have lifted Malaysian inventories for a fifth consecutive month in August.In Indonesia, stocks are lower than Malaysia's, although there could be a near-term buildup as oil palms remain in a seasonal production cycle and the impact of forest fires on production may not be significant, SunSirs noted."Some palm planting areas in Indonesia have been hit by fires, but the fires did not affect the core producing areas, nor did they cause large-scale damage to palm trees. The impact on the current output is weak, and it is more of a pulsed positive factor," SunSirs said.Earlier, StoneX analyst Cheang Kang Wei told Reuters that output from Kalimantan, a major producing region in Indonesia, could drop by 12% to 15% in Q4, while the Indonesian Palm Oil Association, Gapki, revised down its 2026 national production forecast by 2.9% to 56.8 million metric tons.The market is likely to maintain near-term weakness before gradually strengthening as El-Nino driven supply risks and rising biofuel consumption in Indonesia provide upward momentum."The impact of El Nino is still in the distant medium and long term, and short-term supply pressure remains... However, in the medium term, supported by expectations of a decline in palm fruit production and the implementation of Indonesia's B50 policy, palm oil prices have room for upside," SunSirs said.