Palm oil drops to a two-week low after ceasefire, dragging crude oil down

Malaysian palm futures fell more than 3% on Tuesday, hitting their lowest level in two weeks, due to a sharp fall in crude oil prices following a U.S.-Iran ceasefire agreement.

The benchmark?palm-oil contract for June delivery at the Bursa Derivatives Exchange was 179 ringgit or 3.76% lower than the previous day, closing at 4,586 Ringgit ($1,154.00) per metric ton. This is the lowest price since March 26.

Sandeep Singh of The Farm?Trade in Kuala Lumpur, a consulting and trading firm, says that palm oil markets closely follow developments in the Middle East conflict, "mirroring" movements in crude oil price.

Oil dropped below $100 per barrel after U.S. president?Donald Trump announced a two-week truce with Iran. This was subject to an immediate, safe and secure reopening of Strait of Hormuz.

Palm oil is less desirable as a biodiesel feedstock because crude oil prices are weaker.

Singh said that palm oil prices are expected to stabilize at around 4,500 ringgits, backed by a potential B20 mandate in Malaysia as well as lower inventories.

The plantation and commodities ministry said that Malaysia will expand its palm-based B20 Biodiesel program nationwide in phases. This is to take into consideration the price sensitivity of palm oil in relation to petroleum prices.

Dalian's palm oil contract, which is the most active contract in Dalian, fell 4.36%. Prices of soyoil on the Chicago Board?of?Trade fell by 3.28%.

As palm oil competes to gain a share of the global vegetable oils' market, it tracks the price changes of its rival edible oils.

The palm ringgit's currency of trade has strengthened by 1.34% against dollars, making it more expensive for foreign currency buyers.

An official confirmed that Indonesia's energy ministry issued a ministerial decree establishing a timeline for the implementation of its mandate on biofuel blends. The move is part of Indonesia's efforts to meet its goals in terms self-sufficiency and energy transition. ($1 = 3.9740 ringgit)

(source: Reuters)