Palm posts second weekly fall on demand worries, despite rising exports

Malaysian palm oil futures rose on Friday on gains in rival edible oils and improving February exports, although worries over Chinese demand due to the coronavirus outbreak led the commodity to its second straight weekly loss.

The benchmark palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange closed up 32 ringgit, or 1.23%, at a settlement price of 2,622 ringgit ($626.25).

But palm oil lost 1.4 per cent this week as the epidemic in No. 2 buyer China disrupted economic activity.

Demand concerns were, however, eased by an improvement in exports, with surveyors reporting that Malaysia's Feb. 1-20 exports increased by 8.7-10.9 per cent from the month before.

Sentiment was also supported by India's resumption of purchases of refined palmolein from Indonesia, a move that surprised the industry as just last month New Delhi had restricted imports of the commodity and informally told traders not to purchase from Malaysia following a diplomatic row.

New Delhi's move would alleviate some concerns over falling demand from India, the world's largest consumer of edible oils, said Marcello Cultrera, institutional sales manager at Phillip Futures in Kuala Lumpur.

Malaysian refined, bleached and deodorised (RBD) palm oil is trading at a discount of $7.5 to Indonesian crude palm oil, Cultrera said, adding that the "discount will surely widen moving forward, giving Malaysian RBD palm oil and olein a demand opportunity from Bangladesh, Nepal and Indonesia." Palm also tracked gains in rival edible oils. Dalian's most-active soyoil contract was up 0.9 per cent, while its palm oil contract rose 1%. Soyoil prices on the Chicago Board of Trade gained 0.07%.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

There might be some buying ahead due to a weakness in the ringgit, a Kuala Lumpur-based trader said.

The ringgit, palm's currency of trade, was 0.17 per cent lower against the dollar, making the tropical oil cheaper for holders of other currencies.

Malaysia expects to implement the B30 palm biodiesel mandate in the transport sector by 2025, its prime minister said on Friday.