Palm oil reaches 3-week high due to biodiesel plans in Indonesia and Malaysia's production woes
The price of Malaysian palm oils futures rose for the fourth time in a row on Monday. They reached their highest level in over three weeks due to Indonesia's plans to increase its biodiesel blend and worries about rainy weather affecting Malaysia's production.
By midday, the benchmark palm oil contract on Bursa Malaysia's Derivatives exchange rose 52 ringgit or 1.34% to 3,919 Ringgit ($902.79) per metric ton.
The contract reached its highest intraday level since August 2 at 3,925 ringgit.
Indonesian President-elect Prabowo Subito hopes to have a mandatory blend of 50% biodiesel made from palm oil by the beginning of next year. He said this would reduce fuel imports by 20 billion dollars per year.
Last week, the country announced that it would increase the blend to 40% by January 2025 from the current 35%.
Lingam Supramaniam of Selangor's brokerage Pelindung Bestari stated that the above factors, along with the incessant rainfall and production concerns, were the main drivers for the current firmness on the palm oil markets.
Malaysia, which is the second largest palm oil producer in the world, has forecast storms for Aug. 26-27.
Data from Intertek Testing Services, a cargo surveyor, and AmSpec Agri Malaysia, an independent inspection company showed that exports of palm oil products from Malaysia for the period August 1-25 were down between 14.1% and 14.9% compared to a month ago.
Dalian's palm oil contract, which is the most active contract in Dalian, grew by 2.98%. Chicago Board of Trade soyoil prices rose 0.32%.
As they compete to gain a share of the global vegetable oil market, palm oil is affected as well by changes in prices in other oils.
The oil prices continued to rise on concerns that a spillover of fighting from Gaza into the Middle East may disrupt regional supplies. Meanwhile, imminent U.S. rate cuts have lifted global economic growth and fuel demand expectations.
Palm oil is a better option as a biodiesel feedstock because crude oil futures are stronger.
Wang Tao, a technical analyst, believes that palm oil could test resistance at 3,892 Ringgit per metric tonne. A break above this level would confirm a range between 3,909 Ringgit and 3,927 Ringgit. ($1 = 4.3410 ringgit)
(source: Reuters)