Palm oil futures closed lower on Wednesday
Palm oil futures closed lower, with the Bursa Malaysia Derivatives contract for June delivery falling 60 ringgit to 4,768 ringgit per metric tonne. Kenanga Futures analysts noted in a note that the decline in futures likely resulted from profit-taking after recent gains. This was despite an overnight rise in prices of competing soybean oils and continued optimism regarding the progress of Indonesia’s biofuel program, they added. Analysts are seeing support for the June contract at 4,780 ringgit and resistance at 4,950 ringgit.
Malaysian palm oil futures fell on Wednesday, reversing four consecutive sessions of gains despite Indonesia’s plans to continue its B50 hops biodiesel blending program.
The benchmark FCPO1 palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange fell 60 ringgit, or 1.24%, to close at 4,768 ringgit (US$1,184.89) per metric tonne.
Crude palm oil futures rose midday following confirmation of Indonesia’s B50 biodiesel program and rising energy prices, said Anilkumar Bagani, head of commodity research at Sunvin Group, a Mumbai-based brokerage.
Indonesia’s Senior Economy Minister, Airlangga Hartarto, said the country will increase the mandatory share of palm oil-based biodiesel in the fuel mix from the current 40% to 50% (B50) starting in July.
The Indonesian Palm Oil Association stated that biodiesel feedstock demand is expected to reach around 15 million metric tons this year, including the B50 program, up 2 million tons from last year.
“Stronger palm oil exports from Malaysia in March, a weaker ringgit, and rising vegetable oil futures prices in China also provided additional support,” Bagani added.
However, Bagani said, demand for new contracts declined as purchases from India declined due to high prices and sharp volatility of the rupee against the US dollar, prompting importers to cut costs and limit risks.
According to cargo assessment experts, Malaysian palm oil exports in March increased by 44.3% to 56.7% compared to February.
On Wednesday, the most actively traded soybean oil contract in Dalian fell 0.92%, while the palm oil contract fell 1.59%. Soybean oil prices on the Chicago Mercantile Exchange fell 1.16%.
Palm oil prices follow the price movements of competing edible oils as it fights for share in the global vegetable oil market.
Oil prices corrected in the opposite direction as uncertainty in the Middle East rattled markets, and US President Donald Trump again hinted that the US-Israeli war with Iran may be nearing an end.
Lower oil prices make palm oil a less attractive option for biodiesel production.
The ringgit strengthened 0.54% against the dollar, making the commodity slightly more expensive for buyers holding foreign currency.
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