Key Takeaways
- Malaysian palm oil futures climbed on Friday, logging a weekly gain.
- El Niño weather conditions are causing concerns over production in Malaysia and Indonesia.
- Palm oil prices are influenced by the global vegetable oils market and competition with soy oil.
Malaysian palm oil futures saw an increase on Friday, with the benchmark contract for November delivery gaining 27 ringgit, or 0.55%, to close at 4,931 ringgit ($1,220.24) a metric ton.
The rise in prices was driven by ongoing concerns over the impact of El Niño weather conditions on palm oil production in both Malaysia and Indonesia, according to David Ng, a proprietary trader at Kuala Lumpur-based trading firm Iceberg X Sdn Bhd.
While Dalian’s soyoil contract declined by 0.19% and its palm oil contract by 0.39%, soyoil prices on the Chicago Board of Trade fell by 0.46%, reflecting the competition between the two commodities in the global vegetable oils market.
Palm oil prices are influenced by the movements of rival edible oils, as it competes for a share of the global market. The rise in palm oil prices was partially offset by a slight easing in oil prices, which made palm oil a less attractive option for biodiesel feedstock.
The rise in palm oil prices this week was a recovery from the previous week’s losses, with the contract gaining 0.76% overall.
Indonesia’s efforts to control global palm oil prices through a new commodities exchange may face challenges, as it struggles to compete with established bourses and risks backfiring if participation is mandatory.
Indonesia’s state-owned plantation company, Agrinas Palma Nusantara, is targeting an output of 1.5 million tons of palm oil next year, highlighting the ongoing efforts to boost production in the country.
The rise in palm oil prices is also linked to rising U.S.-Iran tensions, which have heightened concerns over potential supply risks in the Middle East, making palm oil a more attractive option in the market.
