Malaysia’s benchmark palm oil futures declined on Monday as falling crude oil prices weighed on the biodiesel demand outlook, although gains in rival edible oils in China limited the losses, Finimize reported.
The benchmark January palm oil futures contract on Bursa Malaysia Derivatives Exchange fell 0.49% to 4,658 ringgit per metric tonne, according to Reuters. Crude oil prices dropped more than 1%, reducing the competitiveness of palm-based biodiesel against conventional diesel.
Lower crude oil prices generally weaken the economics of biodiesel production, limiting the ability of producers to pay higher prices for palm oil as feedstock.
However, gains in competing edible oils provided some support. China’s Dalian soyoil futures rose 0.7%, while Dalian palm oil futures gained 0.85%. US soyoil futures on the Chicago Board of Trade also edged up 0.18%.
The strength in rival edible oils could support palm oil prices through substitution demand, as food manufacturers and buyers switch between different vegetable oils depending on relative prices.
A weaker Malaysian ringgit also offered some support by making palm oil exports more competitive in dollar terms. Additionally, private surveyors estimated a sharp increase in Malaysian palm oil product exports in October, providing another positive factor for the market.
Market sentiment remains influenced by competing factors, with weaker crude oil prices weighing on the biodiesel demand outlook while stronger soyoil prices, a weaker ringgit and improved export prospects helping limit the downside.
Traders are expected to monitor movements in crude oil and competing vegetable oils for further direction in the palm oil market.
