Palm closes lower but logs second weekly gain

On Friday, Malaysian palm oil futures fell lower due to pressure from elevated inventories, but the contract still marked a second consecutive weekly increase. The October delivery benchmark palm oil contract on Bursa Malaysia Derivatives Exchange closed 13 ringgit, or 0.28%, lower at 4,711 ringgit ($1,153.53) per metric ton. However, the contract rose 0.73% this week.

Traders attributed the drop to higher end-July stocks and weaker Chicago soyoil prices. Despite concerns over El Niño-related weather disruptions and higher energy prices, losses were limited. Malaysia's palm oil stocks hit a five-month high in July, as production outpaced rising export demand, according to data from the Malaysian Palm Oil Board.

Dalian’s most-active soyoil contract and its palm oil contract both gained 1.04% and 1.43%, respectively. Soyoil prices on the Chicago Board of Trade slipped 0.37%. Palm oil prices mirror those of other edible oils, as it competes for market share. Oil prices climbed and were poised for weekly gains after the U.S. announced an indefinite naval blockade of Iran, raising fears of crude supply disruptions from the Middle East.

Palm oil becomes more appealing as a biodiesel feedstock when oil prices rise. In July, India's edible oil imports surged to their highest level in 10 months as refiners increased purchases of palm oil and soyoil to restock inventories for the festival season, according to the Solvent Extractors’ Association of India. Meanwhile, Indonesian President Prabowo Subianto disclosed that a new state export firm would oversee vital commodity shipments, with its role set to expand.

He also announced the launch of a mineral and strategic commodities bourse in January 2023, which would establish reference prices for Indonesia's primary commodities.