-- Malaysian palm oil futures eased from near two-week highs on Thursday, as traders booked profits and as weak exports offset expectations of tighter supply due to the El Nino weather phenomenon.
Ending a three-session rally, the Bursa Malaysia Derivatives' May crude palm oil contract lost 0.2% to 4,540 Malaysian ringgit ($1,144.73) per metric ton. The June contract dropped by the same extent to 4,591 ringgit/mt in midday trade.
Both contracts were up more than 3.5% so far this week, reversing two straight weekly losses.
Prices also declined on Thursday despite an increase in crude oil prices and a weakening in the local currency.
Export demand for the current month has softened, with cargo surveyors reportedly estimating a 25.6% to 25.8% month-over-month drop in Malaysian shipments for the first 20 days of April, largely due to lower Middle Eastern demand.
Nonetheless, expanding biofuel use in Southeast Asian producers, following improved economics and to help meet domestic market needs amid ongoing supply chain disruptions, will support palm oil going forward.
Higher biodiesel programs in Indonesia, Malaysia, and Thailand, as well as the potential impact of El Nino phenomenon on palm oil output, will tighten supply.
With the market looking at how extreme weather conditions will impact production, "prices still have room to rise," according to price reporting agency MySteel.
It expects palm oil prices to trade in a volatile range in the near term.
BMI Research, as cited by The Edge Malaysia, said El Nino concerns will be a supportive factor going forward and will temper declines brought about by fading geopolitical risk premium.
In the short term, it reportedly expects developments in the US-Iran conflict to continue influencing market trends, with palm oil prices likely to slip to around 4,200 ringgit/mt in Q2, assuming de-escalation in the Middle East conflict.