Malaysian palm oil futures fell more than 1% on Tuesday

Malaysian palm oil futures fell more than 1% on Tuesday, ending a four-day rally, fueled by weaker soybean oil prices and uncertainty over several key Indonesian policies.

Palm oil prices fell, following the decline in soybean oil prices on the Chicago Mercantile Exchange. Palm oil prices have proven highly sensitive to oil price volatility amid the conflict in the Middle East. As noted in a research note from Citic Futures, the conflict has virtually paralyzed palm oil exports to Iran and the UAE. Transportation and insurance costs for exporters have also increased significantly, potentially reducing demand for palm oil. The June delivery contract on the Bursa Malaysia Derivatives Exchange fell 71 ringgit to 4,583 ringgit per tonne.

The benchmark June delivery palm oil contract FCPO1 on the Bursa Malaysia Derivatives Exchange fell 71 ringgit, or 1.53%, to 4,583 ringgit (US$1,170.33) per metric tonne at the close.

According to Anilkumar Bagani, head of commodity research at Sunvin Group, a Mumbai-based brokerage, crude palm oil futures are expected to trade lower amid lower soybean oil prices and the lack of confirmation of Indonesia’s palm oil export policy.

Indonesia’s revision of export taxes and a lack of clarity over mandatory use of B50 biodiesel also weighed on prices, Bagani said, referring to a blend of 50% palm oil-based biodiesel and 50% conventional diesel.

The most active soybean oil contract in Dalian fell 0.78%, while the palm oil contract CPO1 rose 0.3%. Soybean oil prices on the Chicago Mercantile Exchange rose 0.08%.

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

Meanwhile, oil prices rose about 4%, recouping some of the previous session’s losses, as Iranian attacks on the United Arab Emirates revived supply concerns and the Strait of Hormuz remains largely closed.

Stronger oil futures are making palm oil a more attractive biodiesel feedstock option.

According to shipping experts, Malaysian palm oil exports increased by 43.5% to 56.9% month-on-month from March 1 to 15.

The ringgit appreciated 0.31% against the dollar, making the commodity slightly more expensive for buyers holding foreign currency.

Tags: prices, Malaysia, palm oil