Commodities
Asia Biofuels Update: Malaysian Palm Oil Tracks Stronger Rival Oil
Malaysian palm oil futures inched up on Monday, as rival soybean oil on the Chicago and Dalian exchanges rose, despite weakening exports.The Bursa Malaysia Derivatives' May crude palm oil contract climbed 1.66% to 4,529 Malaysian ringgit ($1,144.84) per metric ton. The June contract gained 1.74% to 4,565 ringgit/mt.Cargo surveyors reportedly estimated a 25.6% to 25.8% month-over-month drop in Malaysian shipments for the first 20 days of April, according to Phillip Capital and Trading Economics.An analysis by price reporting agency Fastmarkets showed that Malaysia's exports to most regional destinations fell in the first half of April, with the largest drop recorded for Middle Eastern shipments, due to a recent surge in product cost and freight rates.For the April 1-15 period, exports fell from a month earlier by 324,724 metric tons to 580,018 mt, primarily due to a 114,650 mt decline in shipments to the Middle East, based on Intertek Testing Services data, cited by the agency.Flow to India reportedly reduced to 102,300 mt from 150,600 mt, while cargoes to China decreased to 54,760 mt from 67,550 mt.India's purchases may rebound ahead of a seasonal demand, but China's imports may remain under pressure due to negative economics.In China, "domestic imports margins remained deeply inverted, leading to few vessel purchases and even two cancellations, but port inventories remained high," Chinese price reporting agency MySteel said.Palm oil market fundamentals have softened overall, with declining exports and rising output creating a "strong supply, weak demand" pattern, MySteel said.The expected rise in Malaysian output following a seasonal low in Q1 could limit the drawdown in domestic stocks, according to Fastmarkets.Nonetheless, palm oil may remain supported if crude oil prices continue to strengthen, boosting biofuel demand.Indonesia is set to expand its biodiesel program to 50% from the current 40% beginning July 1, while Malaysia is working to raise its mandate to 12% and 15% from the current 10%, although timeline has yet to be determined.