Asia Biofuels Update: Malaysian Palm Oil Recovers but set for Third Weekly Loss
Malaysian palm oil futures rebounded on Friday, driven by stronger crude oil prices and a softer local currency, but prices were on track for their third weekly loss due to weak fundamentals.Crude palm oil futures on the Bursa Malaysia Derivatives exchange recovered from two-month lows. The June contract gained 0.60% to 4,388 Malaysian ringgit ($1,115.40) per metric ton, and the July contract rose 0.48% to 4,414 ringgit/mt, in midday trade.Both contracts were on track to have lost about 1.9% over the course of the week.The broader energy market strengthened as uncertainties prevailed over the direction of the US-Iran war, providing support to the biofuels market.On Friday, Malaysian ringgit eased 0.4% against the US dollar, making exports cheaper to foreign buyers. This could provide relief to current export market weakness, resulting from lackluster demand from key importers, India and China.In April, Malaysian exports slumped 14.3% versus March shipments to 1.3 million metric tons, industry data showed. For the first 10 days of May, AmSpec Agri reportedly estimated a 10.8% month-over-month drop in shipments, while Intertek assessed growth of 8.5%.On the supply front, April domestic palm oil output surged 18.4% to 1.6 mmt. Against the backdrop of higher supplies and lower exports, stocks rose 1.7% to 2.3 mmt, to approach a level much higher than the previous year's 1.9 mmt.Among vegetable oils, palm oil led market declines this week, according to price reporting agency MySteel. This reversed a recent sharp uptrend in palm oil prices, largely due to crude oil strengthening and accelerating biofuel programs in key Southeast Asian producers.Once Malaysia and Indonesia implement higher biodiesel mandates in June and July, respectively, increased domestic consumption may lend support to palm oil prices.Supply risks from the potential development of an El Nino weather phenomenon could also serve as a tailwind in the coming months.Palm oil prices may also react to the soybean market movement, after US Trade Representative Jamieson Greer reportedly said China may buy up to "double-digit billions" worth of US agricultural products following the Trump-Xi summit.Greer, however, did not identify the farm goods and did not stipulate a commitment to any volume.