Commodities
Asia Biofuels Update: Malaysian Palm Oil Down; Another Weekly Decline Expected
Malaysian palm oil futures slipped on Friday and were set for another weekly drop, as crude oil and soybean oil eased, and as weakening exports weighed on sentiment.The Bursa Malaysia Derivatives' May crude palm oil contract fell 0.8% to 4,408 Malaysian ringgit ($1,114.40) per metric ton, and the June contract edged lower by 0.7% to 4,447 ringgit/mt. Both contracts were on track for 2% weekly declines, on top of a 6% drop last week due to crude oil price moderation.Signs of easing geopolitical tensions in the Middle East, likely resulting in lower energy prices, could reduce competitiveness of biofuels, at a time when top palm oil producers are just about to begin higher blending in biodiesel.Indonesia, the world's top palm oil producer, is planning to raise its biodiesel mandate in H2 to 50%, or B50, from the current B40 blend, a change which is likely to reduce exportable supply.The second-largest producer, Malaysia, which is currently implementing a B10 program, is expected to begin a roll-out of B12 soon, with plans to increase that to B15 at a later time.The third-largest producer, Thailand, has just begun introducing its B7 program, an increase from the previous B5.Diesel supply has been heavily impacted by the Middle East conflict, prompting Southeast Asian palm oil producers to raise biodiesel blending ratios, to help meet domestic market needs.Malaysia's export market is expected to gain competitiveness as a result, potentially boosting shipments. Its exports declined 34% in the first 15 days of April versus the same period of March, due to high prices.Key importers India and China are likely to defer purchases once the market stabilizes, The Edge Malaysia reported, citing CGS International.Nonetheless, India may still prefer palm oil over other vegetable oils due to its cost competitiveness, according to the Minister of Plantation and Commodities Seri Noraini Ahmad, as cited by the news agency.India may also start replenishing stocks ahead of seasonal demand and after imports dropped to a three-month low in March, Trading Economics said.In China, frequent cancellations of imports have lifted domestic prices, providing a "strong" floor for palm oil futures, according to Chinese price reporting agency MySteel.