Malaysian palm oil futures closed higher on Wednesday

Palm oil prices rose after the Malaysian Palm Oil Board reported a sharp decline in production in February. AmInvestment Bank believes the decline likely reflects a reduction in the number of working days last month. Production may continue to decline during Ramadan and Hari Raya before rebounding in May.

Malaysian palm oil futures closed higher on Wednesday, supported by a stronger position for rival soybean oil in the Chicago market and a recovery in oil prices.

The benchmark palm oil contract FCPO1 for May delivery on the Bursa Malaysia Derivatives Exchange rose 71 ringgit, or 1.6%, to close at 4,499 ringgit (US$1,149.76) per metric tonne. Earlier in the day, it fell to 4,395 ringgit.

Soybean oil on the Chicago Mercantile Exchange rose 3.11%. The most actively traded soybean oil contract in Dalian rose 0.68% after falling 0.19% in morning trading, while the palm oil contract gained 0.51% after falling 0.25% earlier.

Palm oil prices follow the price of competing edible oils as it competes for share in the global vegetable oil market.

Oil prices rebounded on Wednesday as markets questioned whether the International Energy Agency’s announced plan for a record release of oil inventories would be able to offset potential supply disruptions caused by the US-Israeli conflict with Iran.

Higher oil futures rates make palm oil a more attractive feedstock option for biodiesel production.

Malaysian palm oil exports increased by 45.3% from March 1 to 10 compared to the same period last year, according to independent inspection company AmSpec Agri Malaysia. According to cargo inspection company Intertek Testing Services, the increase was 37.9%.

Malaysian Palm Oil Exports (in million tonnes) from March 1-10 compared to February 1-10

ITS: 622,445 vs. 451,340 (+171,105 or +37.91%)

AMSPEC: 581,364 vs. 399,995 (+181,369 or +45.34%)

Meanwhile, rising vegetable oil prices and shipping rates are pushing Indian buyers to urgently deliver amid concerns that shipments of recently purchased soybean and sunflower oils could be delayed due to the conflict in the Middle East.

On Wednesday, leading Indonesian palm oil association GAPKI reported a decline in new export orders after the US-Israeli war against Iran led to higher logistics and insurance costs.

The Malaysian ringgit, the currency used in the contract, strengthened 0.18% against the US dollar, making palm oil more expensive for holders of foreign currency.

Tags: prices, palm oil