Malaysian palm oil futures rose on Friday

Malaysian palm oil futures rose on Friday, posting a 3.80% weekly gain, boosted by expectations that Indonesia’s planned mandatory B50 requirement will boost domestic consumption and tighten global supplies.

Indonesia, the world’s largest palm oil producer, plans to launch its B50 biodiesel program, which involves blending 50% palm oil-based biodiesel with 50% conventional diesel, on July 1, Energy Minister Bahlil Lahadalia said Thursday after fuel tests showed positive results.

The benchmark FCPO3 palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange rose 72 ringgit, or 1.57%, to close at 4,645 ringgit (US$1,123.61) per metric tonne.

Markets in Dalian and Chicago were closed for public holidays.

“Futures are expected to rise sharply today amid optimism over confirmation of mandatory B50 biodiesel use in Indonesia, expectations of an imminent official allocation of B50 quotas, and a possible bottoming of gasoil futures after the recent steady decline,” said Anilkumar Bagani, head of research at Mumbai-based vegetable oil brokerage Sunvin Group.

Brent crude oil stabilized on Friday, but is still forecast to decline more than 8% for the week as traders assess the deteriorating prospects for a US-Iran truce after talks broke down and Israel intensified attacks in Lebanon.

Lower crude oil futures prices make palm oil a less attractive feedstock option for biodiesel production.

According to the Malaysian Palm Oil Council, crude palm oil prices in Malaysia are expected to fluctuate between 4,400 and 4,650 ringgit (US$1,070 to US$1,130) per metric ton in July.

The ringgit weakened 0.41% against the dollar, making the commodity cheaper for buyers holding foreign currency.

Tags: prices, palm oil