Palm Oil Climbs as Tighter Supply Outweighs Indian Demand Fears
Palm Oil Steadies as Weaker Indian Demand Counters Lower Output
(Bloomberg) -- Palm oil futures advanced toward the highest level since 2017 as prospects for slowing production and increased biodiesel demand outweighed concern over lower demand from India, the biggest importer.
Malaysian production fell 14% in November from the previous month, more than expected, while Indonesia is introducing its B30 biodiesel program in January, increasing it to B40 toward the end of the year. The sharp gains in prices have blunted demand from India, with imports probably dropping to a five-month low in November, according to a Bloomberg survey.
Sales have slowed due to a sharp increase in prices, and that will keep demand in check, especially since sunflower and soybean oils are now more competitive, according to Rajesh Modi, a trader at Sprint Exim Pte in Singapore.
However, some buyers still aren’t covered, and anticipation that production will continue its seasonal downtrend, depleting stockpiles, is propping up the market, he said. Expectations of robust consumption in Indonesia due to its biodiesel mandate are also supportive, Modi said.
The world’s most used edible oil rose as much as 1%, before closing up 0.5%. Prices are up about 50% since the middle of July on expectations that output will weaken and biodiesel demand will increase from Indonesia and Malaysia.
| Drivers |
|---|
|
| Prices |
|---|
|
To contact the reporter on this story: Anuradha Raghu in Kuala Lumpur at araghu3@bloomberg.net
To contact the editors responsible for this story: Anna Kitanaka at akitanaka@bloomberg.net, James Poole
©2019 Bloomberg L.P.