VEGOILS - Palm oil falls track rival oils and Indonesia's B50 allocation uncertain

Malaysian palm oil futures declined for the second consecutive session on Wednesday. This was due to a decline in vegetable oils in Dalian and Chicago. Traders also said that uncertainty over Indonesia's biodiesel allocations, B50, further dampened market sentiment.

By midday, the benchmark palm oil contract on Bursa Malaysia's Derivatives exchange for October delivery had fallen 13 ringgit or 0.28% to 4,597 Ringgit ($1,123.14).

Indonesia allocated 15,64 million kilolitres under its B40 programme in this year. However, the ministry has yet to announce additional quotas.

Dalian's soyoil contract that was the most active fell 1.12% while palm oil contracts dropped 0.53%. Soyoil prices at the Chicago Board of Trade fell by 0.68%.

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

Anilkumar bagani, head of commodity research at Sunvin Group in Mumbai, said: "However the palm oil discount against other oils, El Nino threat and potential supply squeeze from Indonesian B50 mandate continue to provide support."

According to Energy Minister Bahlil Lahadalia, Indonesia's mandate for increasing the biodiesel mix to 50% palm oil from 40% will increase crude oil consumption to between 16,3 million and 17,2 million metric tonnes from 15,2 million tons.

The Malaysian Palm Oil Council announced on Wednesday that crude palm oil in Malaysia is expected to trade between 4,400 and 4,650 Ringgit ($1,076 to $1,137) a metric ton.

The oil prices continued to rise on Wednesday, as concerns about further disruptions in supply increased. Palm oil is more appealing as a biodiesel feedstock because crude oil futures are stronger.

Technical analyst Wang Tao stated that palm oil could retrace even further, i.e., into a range between 4,560 and 4,580 ringgit for a metric ton. This is because it has dropped below a rising channel.

(source: Reuters)