Palm oil futures closed lower on Friday

Palm oil futures closed lower amid mixed export data. The Malaysian Palm Oil Council reported on Friday that the country’s palm oil exports in March rose 41% from the previous month. A significant increase in March exports could put pressure on inventory levels, which could decline over the next one to three months due to low production, Citi analyst Gan Huang Wen noted in a note. However, palm oil demand appears to have weakened in April: Amspec Agri Malaysia estimates that Malaysia’s palm oil exports from April 1 to 10 fell 31% from the previous month.

Malaysian palm oil futures fell more than 2% on Friday, ending a five-week rally, as concerns that increased production could outpace demand amid the ongoing war in the Middle East weighed on prices, even as inventories fell to a seven-month low in March.

The benchmark FCPO1 palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange fell 108 ringgit, or 2.33%, to close at 4,535 ringgit (US$1,144.05) per metric tonne.

This week, the contract fell 6.28%, marking its biggest weekly decline in nearly 16 months.

Malaysia’s palm oil inventories fell in March, declining for the third consecutive month and reaching a seven-month low amid a sharp rise in exports, which more than offset a modest increase in production.

“As we approach the peak production months of April, May, and June, the decline in demand caused by the war in the Middle East and rising shipping costs will begin to impact export figures for the period from April 1 to 10,” said Paramalingam Supramaniam, director of brokerage Pelindung Bestari.

“If exports fail to keep up with the seasonal increase in production, ending stocks will inevitably rise again, limiting any near-term recovery. Exports should remain resilient, but given the current situation, this will be challenging,” he added.

According to cargo experts, Malaysian palm oil exports fell by 30.7% to 38.9% month-on-month between April 1 and 10.

The most actively traded soybean oil contract in Dalian rose 0.4%, while the palm oil contract rose 0.11%. Soybean oil prices on the Chicago Mercantile Exchange fell 0.87%.

Palm oil prices are tracking those of competing edible oils as they compete for share in the global vegetable oil market.

Oil prices rose, driven by renewed concerns about supply from Saudi Arabia and the near-total halt of tanker traffic through the critical Strait of Hormuz.

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

Tags: prices, palm oil