-- Malaysian palm oil futures edged lower on Friday and were on track for a second weekly loss, as crude oil prices logged sharp declines amid peace deal hopes and as weakening demand continued to weigh on sentiment.
The Bursa Malaysia Derivatives' June crude palm oil contract slipped 0.04 % to 4,505 Malaysian ringgit ($1,152.83) per metric ton. The July contract eased by the same extent to 4,539 ringgit/mt. The contracts were set to lose more than 0.6% over the week.
Malaysia has seen softer exports in the first 25 days of April, with cargo surveyors estimating a 15.7% to 16.8% month-over-month decline in shipments, largely due to logistical disruptions in the Middle East and as buyers exercised caution with buying due to high prices.
Palm oil discounts to rival edible oils have eroded due to the recent price uptrend, resulting in a demand shift in India. Dealer estimates cited by Reuters showed a month-over-month drop in the country's palm oil purchases in April, and a rise in soybean oil and sunflower oil imports.
S&P Global said that price spreads between Asian crude palm oil and South American soybean oil have shifted from negative to positive territory. From discounts of $50/mt to $100/mt earlier in the year, palm oil has traded at premiums to soybean oil of $80/mt to $100/mt in March and April.
India typically buys soybean oil from Argentina and Brazil, and imports palm oil from Indonesia and Malaysia.
High freight rates, however, limit arrival of South American soybean oil to Asia, with costs surging by about $130/mt in recent weeks, according to S&P Global.
Over the week, the local currency has strengthened 1.3% versus the US dollar, raising purchase costs to international buyers and further weighing on export demand.
A potential increase in production in April, following a seasonal low in Q1, may also pressure prices. Toward the end of the year, output trend could reverse as the El Nino weather phenomenon develops.
Nonetheless, expected increases in domestic consumption in Indonesia and Malaysia, with the implementation of higher biodiesel blending mandates, could provide an upside.
The release of Malaysia's April palm oil data on May 11 is expected to influence price movement.