Malaysian palm oil futures extended gains for a third straight session

Palm oil prices rose thanks to a stronger Chinese market, higher crude oil prices, and rising soybean oil prices the previous day, said Abdul Hamid, sales director at Pakistan-based Manzoor Trading. Higher oil prices are improving the economics of biodiesel, and Indonesia’s resumption of plans to launch B50 on July 1 remains a key factor, he added. The price differential between palm and soybean oils also plays into palm oil’s hands, he noted, adding that lower palm oil prices are creating strong demand from key markets.

Malaysian palm oil futures rose for a third straight session on Wednesday, finishing at their highest level in nearly three weeks, driven by rising prices for related oils, although expectations of increased production could limit further gains.

The benchmark FCPO1 palm oil contract for July delivery on the Bursa Malaysia Derivatives Exchange rose 67 ringgit, or 1.47%, to close at 4,626 ringgit (US$1,171.14) per metric tonne.

The contract extended its 2.45% gain over the previous two sessions.

“Market sentiment is likely to remain firm, supported by gains in Dalian RBD palm oil and Chicago soybean oil futures. However, price movements may remain volatile amid uncertainty surrounding the US-Iran peace talks,” said a Kuala Lumpur-based trader.

Higher oil prices have made palm oil a more attractive option for biodiesel production.

As of April 13, Indonesia had consumed 3.9 million kiloliters of palm oil-based biodiesel since the start of the year under its mandatory biodiesel use, an Energy Ministry official said, as preparations began to further increase the share of biodiesel in the blend.

The most active Dalian soybean oil contract rose 2.07%, while the CPO1 palm oil contract jumped 1.2%. Soybean oil prices on the Chicago Mercantile Exchange traded slightly higher, up 0.63%.

Palm oil prices are tracking the price movements of competing edible oils as it fights for share in the global vegetable oil market.

Palm oil is expected to test resistance at 4,639 ringgit per metric tonne. A break above this level could lead to gains in the 4,693-4,760 ringgit range, according to Reuters technical analyst Wang Tao.

Tags: prices, palm oil