Palm oil threatens biodiesel in Indonesia

The Malaysian palm futures recovered on Tuesday after two consecutive sessions of losses. This was boosted by Indonesia's imminent B50 biodiesel program implementation.

By midday, the benchmark palm oil contract on the Bursa Derivatives Exchange was up 44 Ringgit or?0.98% at 4,529 Ringgit ($1,115.52).

David Ng said that the potential rollout in Indonesia of the B50 Biodiesel Programme is supporting the near-term market sentiment, while the overnight strength in soybean prices also supported the market.

Indonesia will start implementing its ethanol blended gasoline along with a 50% biodiesel requirement from July 1.

Dalian's most active?soyoil contracts fell 0.06% while palm oil contracts gained 0.56%. Chicago Board of Trade Soyoil Prices were down 0.86%.

Palm oil follows the price movement of rival edible oils as it competes to gain a share of global vegetable oils market.

Crude oil prices continued to fall as markets weighed the prospect of resuming supply through the Strait of Hormuz, against the shaky?market drivers of the physical market and the lack of information from the preliminary agreement to end the Iran?war.

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

The palm ringgit's trade currency, the dollar, has weakened by 0.35%, lowering the price of the commodity for buyers who hold foreign currencies.

A circular posted on the Malaysian Palm Oil Board's website revealed that Malaysia had lowered the crude palm oil price reference for July to a level which maintains the 10% export duty.

Exports of palm oil products from Malaysia rose between 9.6% to 23.8%, according to cargo surveyors.

Technical analyst Wang Tao stated that palm oil could test a resistance area of 4,527-4,447 ringgits per metric ton. A break above this zone?could result in a gain up to 4,579 ringsgit.

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(source: Reuters)